Midday Market Roundup 08/10/2008

Sydney, Oct 8, 2008 (ABN Newswire) - The market is down 190 at midday – was down 217 at worst. The SFE Futures predicted a 266 point fall in the market this morning. Property and financials down 4.5% each. Resources underperforming – down 5.4% after finishing up 2.9% yesterday on the back of the RBA-rates-cut-induced 220 point rally.

Dow down 508. Up 169 at best. Down 519 at worst. Closed on lows. Bernanke gave a grim speech on the outlook for economy and the credit crisis. Financials down 11.5% to the lowest level since 1997. The expected co-ordinated global easing of interest rates from the ECB and Fed was not forthcoming. The market initially rallied as the Fed set up a Commercial Paper Facility to improve liquidity in the bond market – wasn't enough to stop the market plummeting on recessionary fears. Bank of America – second largest financial firm – down 26% after bringing forward its poor 3Q results (down 68%) with a discouraging outlook. Rumours that Mitsubishi UFJ Financial Group is backing out of the deal to buy 24.9% of Morgan Stanley. Morgan Stanley dropped 25%. Technology stocks down 6.1%. The Fed Fund's rate is factoring in a 50% chance for a rate cut on Oct 29th.Commodities up 1% – oil up – gold up and resources mostly down but not as much as the market - BHP and RIO down 3.2% and 4.8%. Bonds and US dollar down.


Both BHP and RIO down in ADR form overnight, 3.23% and 4.76% respectively. Both up over 1% in the UK. BHP down $2 on last nights close here.

Metals mixed overnight – Nickel down 0.5%, Zinc down 0.13% and Copper up 1.36%. Aluminium up 1.86%.

Oil price up $2.03 to $90.18 on signs that OPEC are considering a supply cut.

Gold up $15.90 to $882

US Bonds down with the 10 year yield up to 3.5%.


The Commonwealth Bank has gone into a trading halt as they do a placement to fund the $2.1bn acquisition of BankWest. They also say they have had high level exploratory discussions with Suncorp-Metway but no deal yet. They are doing a $2bn institutional placement and remain in a two day trading halt whilst they do that. They tell us they are comfortable with earnings forecasts and book quality remains sound. Early broker comments say the deal is good for CBA and will add to earnings almost immediately. Will be interesting to see how the institutional placement goes….will be a good test of the market attitude towards the sector.

Stockland Group (SGP) raised $300m in a placement of 56.6m shares at $5.30 each (match price this morning was 518c and 521c at midday) only a day after it announced a $110m write-down on its UK business. The funds will be used to strengthen SGP's balance sheet. The placement was well over-subscribed with strong domestic and offshore support. The placement was at only a 7% discount to the last close price – pretty good given the fact that SGP was up a strong 7.6% yesterday.

4 major Chinese Steelmakers have announced they are cutting back steel production. Between them they account for around 10% of the global market but the cuts are less than 1% of total annual production. Won't read well for iron ore stocks this morning.

Credit Suisse downgrades the world's biggest iron ore producer Vale saying "Short-term conditions have deteriorated as expected, but the severity may be worse than anticipated on the demand side". Target price down from $53 to $40. The good news….they have $15bn in cash. They suggest forecasts for a 40% decline in iron ore prices next year and too negative and they forecast a 20% rise but only if China maintain iron ore demand. If iron ore prices fall 20% instead they would knock 36% off their Vale valuation.

In other news…


October's index of consumer sentiment down 11% from September on fears of a global slowdown and extended credit crisis – down to a seasonally-adjusted 82 from 92.2. Vindicates RBA's 100bp cut yesterday.



Qantas (QAN) down 3.2% to 301c after disclosing 40 people were injured, 12 of them seriously, when one of their planes experienced sudden loss of altitude. The stock is down 47% in the past 12 months.

Citi expect QBE Insurance (QBE) to gain up to $300m in annual gross written premium from underwriting business that previously would have been provided by AIG. They maintain their HOLD recommendation yet upped their target price to 2850c from 2450c.

Suncorp-Metway (SUN) down 5.8% - it announced yesterday that it had received approaches for its banking and wealth management arm.

JP Morgan has cut both Paladin Energy (PDN) and Energy Resources of Australia (ERA) after cutting their uranium price forecasts by 5.2% in 2008 and 13.7% for 2010. They have cut their target price on ERA to 2180c from 2200c and maintain their NEUTRAL recommendation. ERA down 7.4% and PDN down 12.5%.

Alumina (AWC) feeling the effects of JV partner Alcoa reporting a 3Q fall in earnings of 52%. The stock is down 7.4% to 275c. Alcoa cut their forecast for 2008 aluminium demand by 2% to 6% growth.

Cudeco (CDU) has had its trading halt lifted and its 100% owned Rocklands Group have discovered a high-grade copper and gold intersection. CDU up 5c from 217c.

Transpacific Industries(TPI) clarifies a 7th October announcement – expects EBITDA growth rate of 13-16% for year to June 30th. TPI down 36c to 505c.

Babcock and Brown Infrastructure(BBI) has a resignation from its alternate company secretary. BBI down 2.5c to 26c.

Mirabella (MBN) draws down US$50m loan with Norilsk Nickel. MBN down 24c to 306c.

Equinox's (EQN) Lumwana primary crushing begins and their electric shovel is commissioned. EQN down 10c to 265c.

Mincor Resources (MCR) has discovered a major extension to the Miitel nickel ore system. MCR up 6.5c to 105c.

Australian housing finance fell 2.2% in August, compared to the 1% drop economists expected. Yesterday's decision by the RBA to cut rates by 1% should give the index a boost next month.


 

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