Midday Market Roundup 31/07/08

Sydney, July 31, 2008 (ABN Newswire) - Wall St is up 452 points in two days and we are trying to respond but struggling. After a 79 point rise early on the market is now flagging in low volume to be up 33 - Not as promising as the 92 point rise the SFE Futures. Resources outperforming +2.1% led by the big boys – BHP, RIO and FMG up 2.5%, 2.2% and 3.8%. The drop in the market from the open this morning has come in financials – they were up 1.6% and are now down 0.6%. The NAB has announced a new CEO following last week's profit warning. They were up 2.1% first thing and are now down 1.3%. Stocks hitting fresh yearly lows today include TABCORP Holdings and Patties Foods.

Wall Street closed up 186. Up 189 at best. Up all session – closed on high. It was a good night for Financials +2%, diversified banks up 3.8% and Investment banks and brokerages +3.5%. Bush signed the Housing Bill that will save 15% of flailing home-owners – designed to reduce foreclosures. Fannie Mae and Freddie Macquarie Group up 5.3% and 3.7% after the Securities and Exchange Commission (SEC) extended the emergency limit on naked shorting until August 12th. Oil had a good night – up 3.7% - which led to oil sensitive stocks falling - Automobiles down 3.8% and the Amex Airline Index down 4.9%. 2Q earnings on the S&P have dropped 24% verses a year earlier says Bloomberg – Ex financials earnings have gained 2.8% so far. Companies missing 2Q estimates: Garmin down 22%, Cisco down 1.12%, and Electronic Arts down 6.56% offset strength in Comcast which was up 4.64% despite posting below-expectation-results. The NASDAQ had an OK session closing up 0.44%.


Both BHP and RIO up in ADR form overnight, 2.7% and 4.16% respectively.

Metals mostly up overnight – Copper up 1.23%, Nickel up 3.9% and Zinc down 0.32%. Aluminium was unchanged.

Oil price up $4.53 to $126.74 after a surprise 3.5m barrel fall in U.S. inventories.

Gold down $13.60 to $902.90

Bonds down with the 10 year yield up to 4.05% from 4.04%.

The big news this morning is that Brisconnections unit trusts (BCSCA) have listed today at a dollar and have traded at 48c. This is the company described by its own CEO as a natural short. That should put a few planned floats on the back burner for a month or twelve.

The other big news today is the National Australia Bank (NAB) announcing Cameron Clyne as John Stewarts replacement. Clyne currently heads the NAB's New Zealand operations and will take over from Stewart on Jan 1 2009, but will become group CEO designate on October 1 to "ensure an orderly handover". The fact that the appointment was internal suggests that either the NAB management has depth or it has a lack of options. Coming so close after the profit warning the market would be excused for a wry smile on the NAB statement that "Mr. Clynes appointment represented the culmination of an extensive succession planning exercise conducted over the last 18 months". Nothing to do with the profit warning then. NAB was up but is now down 38c to 2509c.

Double Whammy for Woolworths: New Zealand's Court of Appeal overturned a High Court ruling that would have allowed Woolworths and Foodstuff to make a takeover bid for The Warehouse Group in NZ. On another issue, the AFR reports that the ACCC is set to propose several major reforms from its grocery price inquiry, which will include a Grocery Watch price monitoring system. WOW down 9c to 2495c.


ABC Learning has released a Trading Update: Expects FY08 Loss before tax $437m due to additional write-downs and provisions and it won't pay a 2H dividend. Says it is compliant with all banking covenants and that the first three weeks of FY09 have been encouraging. ABS down 11% to 73c.

Goldman Sachs and Southern Cross Securities sell 30m shares in Fortescue at 800c ($240m). 4.8% discount – on behalf of an early backer (KC Wong?) – offered to International institutions. KC Wong has 134m shares. He bought at prices of between 1 and 3c. Harbinger also thought to be a seller of 17.5% but more likely to do it to a buyer than to the market. Hasn't done the share price any harm this morning. FMG up 47c to 887c.

Alumina (AWC) interims are out – look good - 1H Net profit of $43.8m with underlying earnings off $152m, in line with 2H07. Declared an interim dividend of 12c and expects global demand to remain strong. AWC up 12c to 449c.

Leighton Holdings (LEI) announced its John Holland division has been appointed construction partner for the $240m contract to strengthen the West Gate Bridge. LEI up 11c to 4236c.

Just Group (JST) up slightly after saying it expects to announce a 3.5% rise in 2H sales with FY08 sales above the mid point of its guidance. JST up 9c to 326c.

Asciano (AIO) flying – up over 10% - on speculation it may have cancelled plans for dilutive rights issue of over $1bn and be about to embark on asset sales instead. AIO up 49c to 415c.

Australian Worldwide Exploration (AWE) has released their June Q report. June Q revenue of $254m, resulting in record FY revenues of $821m. AWE has net cash reserves of $339m, is debt free and is looking for growth opportunities. AWE up 5c to 359c.

St. George Bank's (SGB) board has re-endorsed its recommendation for the Westpac takeover offer during a two-day meeting that ended yesterday afternoon. SGB up 29c to 2700c and WBC up 19c to 2113c.

Macquarie Infrastructure Group (MIG) up on the news that Macquarie has put it on their restricted list (can't publish research recommendation or advise on it) prompting the rumour that it is one Macquarie satellite that will be privatised. MIG up 4c to 265c.

Perilya (PEM) announced production numbers – June Q Broker Hill lead output 13,368 tons and Zinc output 28,344 tons. Metal output up 18.5% on the Q. PEM up 1c to 54c.

Arrow Energy (AOE) have increased their net 2P reserves by 81%. AOE up 6c to 329c.

ROC Oil (OSH) has released their Bidder's Statement for Anzon Australia.  ROC down 0.5c to 149.5c.

ConnectEast Group (CEU) announces EastLink average daily trips of 270,868 in the first 25 days.  CEU down 0.5c to 94c/

ANZ CEO Mike Smith has told The Australian that the market has had "a correction that was needed" (don't you hate that hindsight cliché) and investors had "lost sight of the fact that banks are still very profitable businesses" in this country. ANZ up 19c to 1629c.

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