Crikey

The market is down 66. The SFE Futures suggested a 66 point fall in the market this morning.

The Dow Jones was down 185 on Friday moving in a 186 point range and closed 1.3% lower on concerns of rising inflation and interest rates and a new concern – the demise of hedge funds. Investment Bank Bear Stearns said it would bail-out one of its hedge funds on the verge of a $3 billion collapse. The fund suffered heavy losses through exposure to the sub-prime mortgage market. Hedge Funds by their nature are highly leveraged and tend to be at the pointy end of any market collapse. The collapse of the LTCM (Long Term Capital Management) fund in 1998 with losses of US$4.6bn in less than 4 months (after 4 years of 40% annualised returns) was a wake up call for those who invested in hedge funds without an understanding of the risk. In the recent case the worst of the sub-prime mortgage market appears to be past, but the collapse is another reminder that we live in a world of unprecedented leverage and risk in financial markets.

The central bank’s Federal Open Market Committee meets Wednesday, they’re expected to leave interest rates unchanged at 5.25% when they release their policy statement on Thursday. The big news on Friday was the IPO of Blackstone Group, its share price closed 13.4% higher to $35.15 in what was the most hyped IPO since Google Inc, and in takeover activity, Sirius Satellite Radio announced they were interested in buying rival XM Satellite Radio Holdings. It was a volatile week for all three indexes, the Dow Jones finished 2.1% lower, the S&P 500 fell 2% and the NASDAQ lost 1.4%.

Resources all down. BHP down 40c to 3498c and RIO down 60c to 3830c. Metals mixed on Friday, Copper down 0.1%, Zinc up 1% and Aluminium down 0.5%. Nickel up 1.5%. Zinifex down 19c to 1871c. Oil price up 96c to $68.85 as the labour strike in Nigeria dragged on for a third day. Woodside down 23c to 4641c. Gold up $2.80. Newcrest up 1c to 2325c.

Not such a good start to the week, our market has followed Wall Street’s lead on Friday and is down 1%. We had a big week last week (All Ords up 1,46% against the Dow Jones down 2.05%), we saw the Aussie dollar hit at 17 year high, Japan’s market hit a seven-year high, the nickel price finished 10% lower. Resources up 3.8% outstripped the industrials up 0.9%. Some massive share price rises in small iron ore stocks. Not much going on this week, there is the FOMC Meeting in the US and US Q1 GDP numbers on Thursday and a few domestic AGMs.

• Amcor (AMC) up 3c to 733c after announcing they sold their 16.7% stake in K Laser China for US$293. The profit on the sale will be reported as a significant item in the 2006/07 FY profit.
• Winemaker Evans & Tate (ETW) announced this morning they had received a merger proposal from Ferngrove Vineyards. Under the deal, ANZ Banking Group (ANZ) who is ETW’s major creditor will take a stake in the merged company by converting $5m of debt in exchange for the issue of new shares. ETW up 0.5c to 15c and ANZ down 21c to 2327c.
• Publishing and Broadcasting (PBL) down 24c to 1948c. Their NASDAQ joint listed venture Melco PBL Entertainment (MPEL) continues to struggle. MPEL closed down 2.1% to 1155c on Friday taking the loss for the week to 8.7%. The stock is down 42% since listing late last year.
• Pallinghurst Investor has upped its bid for Consolidated Minerals (CSM) by 30c to 168c per CSM share plus 2 shares in New CSM for every 5 CSM held. Total value 282c. The bid is agreed. CSM up 11c to 295c.
• Woodside (WPL) CEO Don Voelte told CNBC TV he believes oil and gas prices have peaked in their current “very long duration” cycle, but thinks their “base price” has increased and will “cycle around US$50 to US$60/bbl”. He also downplayed the prospect of WPL becoming a takeover target. WPL down 23c to 4641c.
• Sigma Pharmaceuticals (SIP) down 1c to 219c after Citigroup cut their target price by 10% to 258c.
• In what could be good news for the ASX, The London Stock Exchange has made a US$2.2bn bid for Italy’s Borsa Italiano.
• Most of the property trusts go ex distribution this morning. Ex Dividends have knocked about 13 points off the index this morning.

We have an article in Marcus Today today suggesting that inflation and higher interest rate themes will develop further. Time to lock in those mortgage rates. If you subscribe to Marcus Today this week (before the tax year end) you will get a great deal on subscription rates and go into the draw to win one of three big black glossy Flatscreen Widescreen Xtremeview 22” LCD Multimedia and Gaming computer monitors – if you’re going to sit in front of a screen all day…make it a good one (Subscription costs are deductible expenses in some hands). 

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