Midday Market Roundup 23/10/2008

Sydney, Oct 23, 2008 (ABN Newswire) - The market has followed Wall Street's lead overnight and is struggling – down 177 or 4.3%. The SFE Futures suggested a 191 point fall this morning. Resources getting smashed – down 8.6% overall - led by BHP (down 8.5%) and Rio Tinto (down 14.8%) at midday. Ninety-two companies in the All Ords have hit a fresh yearly low today – most notable being Lend Lease, Goodman Group, Seek, News Corp, Newcrest and West Australian Newspapers.

Wall Street had a stinker overnight – down 514 or 5.69%. All three major indexes copped it – S&P 500 down 6.1% and NASDAQ down 4.77%. Concerns about a global recession, lower-than-expected earnings results and grim outlooks from some major companies in the S&P 500 did most of the damage. Growing concern over the downturn in the global economies overshadowed the fact that the credit markets are improving. Commodities and materials fell on the back of some heavy falls on the London Metals Exchange. The 3-month Libor (London Interbank offered Rate – the interest rate at which banks lend each other money over various terms) was down for the 8th straight session – down to 3.54%, helped by the US government's second stimulus package announced a couple of days ago – an initiative to spend $540bn in buying commercial paper directly from the money market mutual funds.

The rising US dollar and the global slowdown have led to a sharp rotation out of commodities which were being used as an inflation hedge – commodities down 4.5%. Oil down 6.13%. Energy down 10.4%. ConocoPhillips down 9.1%. Exxon down 9.7% and Chevron down 7.6%.  Oil has fallen 54% since its July 11 high. Materials down 8.3%- metal prices all down – copper fell 7.3%. Xstrata down 13.8%. Freeport McMoRan down 18%. Defensives outperformed relatively- consumer staples down 3.8%.

Both BHP and RIO down in ADR form overnight, 13.5% and 14.7%.

Metals all down overnight – Copper down 7.3%, Nickel down 6.5%, Aluminium down 3.4% and Zinc down 1.78%.

Oil price down $4.37 to $66.92 – a 16 month low – on the back of recession fears and a big increase in US fuel inventories.

Gold down $32.80 to $735.20

US Bond up with the 10 year yield down to 3.59%.

ANZ Bank FY result is out – in line with guidance but slightly below expectations. Macquarie Equities have described it as excellent but the stock is underperforming this morning. Cash profit down 23% to $3.03bn, below the $3.11bn most expected but in line with guidance for a 20-25% fall. Declared a 74c dividend. A jump in bad debt provisions did most of the damage, but Mike Smith did say if conditions did stay the same, he expects profits to grow next year.

Plenty going on today….


Babcock & Brown (BNB) says it has received potential strategic relationship approaches from a number of interested parties. It has started to process and review the proposals. The stock is down 94% so far this year. The news hasn't done much for its share price today.

Transfield Services (TSE) has lowered its profit guidance for the year after its negative 1Q performance due to poor weather and retail conditions.

Newcrest Mining (NCM) has released Qrly production numbers – produced 485,978 ounces of gold in 1Q, up 12% in 4Q, up 8.4% on the year. Cash costs nearly double that of last year at $365/oz.

Santos (STO) said it produced 13.2m barrels of oil equivalent in the June Q, down 5% but reiterated FY production. 3Q revenue fell 3% to $730m, but was 16% higher than the same time last year on the back of higher gas prices.

Qantas Airways (QAN) said forward bookings, especially in international markets, has gone south on the back of lower consumer confidence and the struggling Aussie dollar. It has however taken advantage of lower crude prices and hedged over 97% of its expected crude oil requirements for the year.

GUD Holdings (GUD) said 2Q indicators are good for its consumer business but its 1Q sales were in line with last year.

Amcor (AMC) CEO Ken MacKenzie said 1Q volumes in some parts of the business were lower than expected due to the difficult economic conditions.

QBE Insurance has completed its PMI Australia acquisition.


 

Broker Stuff today…


GSJB Were maintain their HOLD recommendation on Riversdale Mining (RIV) and 531c target price after its quarterly update yesterday. They believe the region in which RIV operate in (Mozambique) has "scope to be a significant coking coal producer over the next decade".

OneSteel (OST) had its target price cut to 650c from 790c by JP Morgan who maintained their Overweight recommendation saying, "The stock has underperformed the market recently on concerns the iron ore market has peaked". The target price was cut to reflect 10x FY09 PER and a 5.75x FY09 EV/EBITDA.

Other Stuff…


The Dow Futures are suggesting a 35 point rise on Wall Street tonight.

ASIC Chairman Tony D'Aloisio has failed to explain at a committee hearing why he decided to extend the short selling ban in Australia.

Argentine President Cristina Fernandez de Kirchner announced she was planning to use pension funds ($29bn worth) to meet financing requests. Argentine stocks fell 10.1% after falling 11% the day before – its biggest two-day fall since 1990 biggest. Bond yields went through the roof – yields on Argentina's 8.28% bonds due in 2033 increased 4.64% to 29.23%.

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