Midday Market Roundup 10/07/08

The market is down 82. Financials down 2.7% after losing over 5% in the US last night. Resources down 0.9%% and property getting flogged – down 3.5%. Futures were down 65 first thing.

 

 

 

Dow fell 237 - S&P500 officially closed in bear market territory – 20% down from last year’s high to a two-year low. The Dow 21% below its high. Concerns that the biggest mortgage providers will not survive the US housing recession. Thrift and mortgages sector down 11% - as Fannie Mae and Freddie Mac plummeted 13% and 24% on more capital adequacy concerns. Financial sector had its biggest fall in 6 years. Down 5.7%. All the gains in financials made yesterday, given back. Credit Suisse said 40% of the biggest US lenders may need to cut dividends and raise more capital. They cut the bank sector’s 2008 earnings estimates by 17%. Bank of America and Citigroup fell over 5% on Credit Suisse’s comments. Lehmans down 11.4%, Wachovia down 8%. 

 

Energy sector down 2.1%. Comments that the US housing market is at least 12 months away from any recovery. Housebuilders thumped. Concerns of a Fitch rating downgrade on Merrill Lynch – down 9.25%. Large cap techs down on concerns that business spending in technology has peaked. Cisco down 5.68%. Defensive sectors outperformed – Utilities up 1.19% and consumer staples only down 0.99%. Health Care down up 0.48%. Resources also outperformed. Steel stocks up 3.7%. Nucor and Steel Dynamics upgraded to BUY by UBS. UBS said earnings in the sector would be “robust.” Follows recent upgrades in Bluescope Steel on higher steel price expectations.

• Both BHP and RIO down 0.76% and 0.98% in ADR form. BHP down 87c to 3911c. RIO down 125c to 12190c.


• Metals all up overnight – Zinc up 6%, Nickel up 4.16% and Aluminium 1.43%. Copper up 0.13% and Lead up a big 10.5%.


• Oil price down 18c to $135.88 – it was a mixed session as traders digested larger than expected weekly inventories and news that Iran test-fired nine ballistic missiles, a move considered a possible threat to the flow of Middle East oil. Woodside down 90c to 5832c.


• Gold up $5.30 to $928.60. Newcrest up 40c to 2995c.


• US Bonds up with the 10 year yield down to 3.8%.

 

Quite a bit of research and comment on IAG after the investor briefing yesterday. JP Morgan maintain their UNDERWEIGHT recommendation and 360c target price and say, “Whilst we are supportive of the steps being taken of exiting the loss making segments in the U.K…we believe the timeframe for changing culture can be long and the risks in a rapid change are great.” UBS Warburg cut their target price to 390c from 400c and maintains NEUTRAL. GSJB Were maintain their HOLD and 385c target.

 

Jobs numbers are stronger than expected up 29,800 jobs against expectations of 7,000. Not a lot to be read into it – CPI number on July 23^rd thought to hold the key to interest rates.

 

• CSR (CSR) down 15% on their AGM - MD said they expect profits from their building and sugar units to be up 5% this FY. That’s below forecasts for around 10% growth and raises issues about the performance/synergy benefits from the recently acquired glass business. Looks like they may have paid too much. Consensus forecast downgrades of 5-10% will be in the research tomorrow.


• Newcrest (NCM) research around after an increase in Reserves and Resources in the last couple of days. The stocks is up 3%, helped by a rise in the gold price overnight and a comment from Southern Cross Equities that it is their preferred play after a correction in the long term bull market in gold. Goldman Sachs JB Were also has it as a conviction buy this morning. 


• ConnectEast (CEU) down 8% after the announcement of the first traffic figures from the newly opened EastLink. Traffic volumes were good but the average Toll was below prospectus. It is early days. Goldman Sachs JB Were say “we expect the stock to bounce strongly as the market digests this positive news and the discount for the risk of a traffic disaster is removed from the share price.”


• Metcash (MTS) withdraws its bid for Primary’s former Symbion pharmacy distribution assets. MTS said the assets value is significantly less than what Primary was asking – JP Morgan says MTS showed good discipline. MTS up 3c to 386c.


• Primary (PRY) - Ironbridge-Archer consortium still interested in Primary’s vitamin-making units – wants to build its presence in the Australian pharmaceutical space. PRY up 3c to 453c.


• Bradken (BKN) announce that they expect to report strong FY 2008 results, slightly above the EBITDA growth of 20% and EPS of 15% provided at December’s guidance. BKN up 17c to 801c.


• GPT Group (GPT) hit a 25-year low in early trading as on talk a major investor has sold $100m through JP Morgan in the last 3 days. They had a profit warning this week. One trader on the Dow Jones newswires says it is “totally oversold”. GPT down 8c to 165c.


• RIO announces the sale of its Kintyre Uranium Project for $495m. Bids for its US coal assets due next Wednesday. RIO planning US$15bn divestment of assets to pay down debt used to fund the US$40bn Alcan acquisition.


• Mirabela Nickel (MBN) announces its debt financing package ($80m bridge finance and US$280m loan facility) and 5 year offtake agreement…another step in project development. Project 30% complete. They have also issued the banks 1.5m 3 year options at 722c. Now 537c. If only the nickel price would go up.


• Macmahon Holdings (MAH) will extend its unsolicited $399.4m 1.45-for-1 takeover offer for Ausdrill until the 15^th August. MAH flat at 160c.


• Seek (SEK) says its Chinese website investment will be EPS dilutive in FY09 and will be funded from current debt facilities. SEK down 10c to 484c.


• Macarthur Coal (MCC) expects FY08 net profit to be between $80-$90m, up from previous forecast of $67-$75m. MCC up 75c to 1605c.