Morning Market Report, Jul 24, 2008

Our market is a little sleepy today — down 4. The SFE Futures suggested a 12 point rise in the market this morning. The switch out of resources into financials is continuing but without much conviction. Financials up 1.3%, resources down 2.3% led by both BHP and RIO, both over 2% lower. The big fall in the oil and gold price has meant that BHP, RIO, Woodside and Newcrest have between them knocked 20 points off the index. The resources sector is now down 17% from the recent top.

Wall Street had a bit of a quiet night — the Dow closed up 29. Up 95 at best. Down 45 at worst. Main themes – Oil down, Financials up, Resources down, Gold down $25. Metals down but Zinc up 4%. 110 companies reported results – 4 from the Dow. Oil prices down again – 6 week low — 20% down since the 15th — fall overnight was on a higher than expected build in gasoline inventories (although crude inventories were below expectations) and Gold down $25 on the back of a higher US dollar — Newmont down 4%, Barrick Gold down 7%. Financials up 1.9% despite Washington Mutual falling 20.1% on results including a $3.3bn Q2 loss and concerns about the need for a capital raising. The financial sector was up 4.6% at its peak on the Fannie Mae and Freddie Mac Rescue plan passing through Congress. The Bank of America announced a $3.75bn share buyback — enough to buy 75m shares and Health Insurers had their biggest gain in a decade after WellPoint reported 2Q earnings 5.7% above expectations and UnitedHealth beat expectations. The NASDAQ finished up 0.95% – Amazon.com was up 8% in after hours trade of late results.

Both BHP and RIO down in ADR form overnight, 1.04% and 2.55% respectively.
Metals mostly down overnight – Nickel 2.67%, Aluminium down 0.97% and Copper 0.65%. Zinc up 4.48%.
Oil price down $3.52 to $123.73 – below $125 for the first time since June on fears that high prices and the weak economy are destroying demand.
Gold down $25.70 to $922.80
Bonds down with the 10 year yield up to 4.12% from 4.10%.

Not a lot going on today… a little quiet.

Lots of broker stuff on Macquarie Group (MQG) this morning after their AGM and Trading Update yesterday. The stock jumped over 11.4% yesterday but is still 46% off its highs. Up 1.5% today. ABN AMRO keeps a BUY recommendation and 7600c target. UBS cut their target price to 6000c from 8500c — agrees with AGM comments about last years profits being increasingly challenging to repeat. Log into Marcus to read the rest of today’s broker comments and access our broker archive that runs to over a years worth of broker recommendations.

Gold stocks struggling after Gold fell over $25 overnight in the US. NCM down 8%, LGL — which announces results next week – down 3.7% and SGX down 5%.
Zinc price up 4% but fails to inspire zinc stocks.
According to The Australian, the Commonwealth Bank (CBA) has bid $440m for ABN AMRO’s Australia and New Zealand assets. No comment from CBA. The figure is a lot less than the $1bn the Royal Bank of Scotland wanted. They are seemingly the last buyer left.
The ACCC have approved the Westpac bid for St George. Citigroup believe the NAB might have a crack at St. George now the ACCC decision is out of the way and after NAB pulled out of bidding for ABN AMRO Australia “With more certainty around competition issues, NAB may now be more willing to consider a bid”.
Lion Nathan (LNN) has released its 3Q 2008 Trading Update in line with expectations and reasonably upbeat. They have reaffirmed FY earnings guidance with 7% revenue growth in the 9 months.
There has been a large trade of 4m WA News (WAN) shares bought at 1025c, a premium to the recent trading price of below 950c. Most obvious buyer would be Seven Network (SEV), which already owns 19.4% of the company.
Newcrest (NCM) have released their 4Q Production numbers – share price has fallen 7.2% this morning on the huge drop in the gold price overnight — Gold production at 435,120 ounces, down 1%. Copper up 6% from 3Q. Record FY Gold production of 1.78m ounces. Telfer production was affected by gas outage but can operate now at full capacity after securing interim gas supply. Telfer output expected to be 700.000-750,000 ounces in 08-09.
Singapore Telecommunications (SGT) has signed a deal with 3 major studios that will make it possible for its mio TV service to screen over 50 top US series as early as 24 hours after their US premier.
Woodside Petroleum (WPL) shareholders watch out – Hassle Free Share Sales have written to shareholders offering to buy their shares at a significant discount to their market value, as low as 2599c a share. Now 5294c down 305c or 5.4% on the back of the fall in the oil price overnight.
IBA Health (IBA) has won a regional health project in Mexico.
ING Office Fund (IOF) has provided a portfolio update – well positioned to withstand a slowdown and reinforces solid performance going forward.
JP Morgan expects Amcor (AMC) to announce a FY08 net profit of $372m, down 6% from FY07 when it announces results on August 21.
Biota (BTA) announces it has received royalties of $400,000 on sales of $6.2m from Relenza.
Brokers say HOLD onto Just Group (JST) after Solomon Lew’s Premier Investment (PMV) upped its bid yesterday. GSBJ Were have a 400c target price.
UBS Warburg have a NEUTRAL recommendation on Foster’s Group (FGL) and ponders whether a demerger of the wine and beer business is next.
Qantas up another 5c to 365c on the back the oil price going backwards again overnight. Virgin Blue up 6.47% to 74c.
JP Morgan expects Boral (BLD) to announce a FY08 net profit of $235m, down 21% from last year. They maintain their UNDERWEIGHT recommendation and 550c target price.