Crikey

The market is up 40. The SFE Futures suggested a 16 point rise in the market this morning.

The Dow Jones was up 92 overnight – It moved in a 114 point range and closed up on takeover activity and better-than-expected earnings results. There was a heap of corporate activity overnight, shareholders of GlobalSantaFe and Transocean will receive a combination of cash and shares after the two companies decided to do a US$53bn merger. United Rentals finished 3% higher after Cerberus Capital Management made a $4bn offer, and Teleflex Inc. agreed to buy Arrow International for $2bn. Thanks to two Asian financial partners, Barclays said they would raise their offer for ABN AMRO to $93.1bn and hopefully knockout rival bidder Royal Bank of Scotland. According to Bloomberg, there have been $1.49 trillion worth of acquisitions completed compared to $986.6bn the same time last year. Several blue chips reported better-than-expected earnings results; Merck was the best performing stock in the Dow Jones index (up 6.7%) after announcing a 12% increase in 2Q earnings, and American Express beat analysts’ expectations with their profit result. The NASDAQ had a quiet session closing 0.1% higher.

Resources mixed today…BHP up 33c to 3860c, they have had 4^th Q production numbers which are strong but in line with expectations. They are strong in all divisions with coal and oil better than expected. Costs up as expected. RIO down 12c to 3378c. Metals all down overnight, Nickel down 4.9% and Zinc down 0.4%. Both Copper and Aluminium down 1.1%. Zinifex up 37c to 2067c. Oil price down 88c to $74.65. OPEC head of research Hasan Qabazard said a fair price for crude is between $60-$65/bbl and now has a premium in it due to refinery bottlenecks and speculative money. Goldman Sachs are predicting a US$95 oil price by the end of the year unless OPEC increase production. OPEC meets in September. The NYMEX oil futures contract has been trading options at US$100 – the right to buy oil at US$100. Woodside down 77c to 4518c. Gold down $3.20. Newcrest is up almost 4% on the back of the announcement of their 4^th Q production numbers today. Gold production up 19% on last Q (Cadia up 30% and Telfer up 18% QonQ) and up 5.7% on the year to a record. Copper output up 3% on the Q. Telfer still rain affected. Merrill Lynch retain a BUY recommendation and a 2600c target price. NCM now up 177c to 2625c.

• Qantas (QAN) have a new logo – you have to wonder what they are up to – the cost of implementing such a small change must be astronomic – bigger feet on the kangaroo. As my colleague Sam was told by his store manager when stacking shelves – “If you have nothing to do….find something”. They say the logo is a great fit with the new A380 tail which will be delivered in August 2008. QAN down 1c to 577c.
• Alesco Corporation (ALS) announced this morning they plan to raise A$187.1 million to help fund their acquisition of water management products and services company Total Eden McCracken’s. They also announced a $44m NPAT, up 2.6% from last year and upped their dividend to 36c from 31c. ALS unchanged at 1396c – in a trading halt.
• Talk in Chanticleer (back of the AFR) of a bid for Bluescope Steel (BSL) from Arcelor Mittal with their executives expected to visit Australia this week. Mittal have recently held presentations saying they are under-represented in the Asia-Pacific region. The BSL share price has recently been “suspiciously” rising on no news when it should have been falling on lower steel prices in Asia. BSL up another 24c to 1244c.
• Citigroup have cut their Commonwealth Bank of Australia (CBA) recommendation to “hold” from “buy” saying the share price is getting ahead of itself. CBA has outperformed the market 7% which more than reflects a genuine earnings surprise in 1H07. Despite the downgrade, they upped their estimates and maintained their 5500c target price. CBA up 8c to 5663c.
• HFA Holdings (HFA) up 30c or 12% to 262c – the market clearly thinks their merger with US based absolute return fund manager Lighthouse is a great idea. The deal, which involves HFA paying US$348.5m in cash and 134.67m in HFA shares is expected to increase their international brand and will result in the group’s total funds under management to around US$8bn.
• Compass Resources (CMR) up 11c to 539c after announcing Chairman Gordon Toll would be reappointed for another 3 years. CMR up 54% in the past 12 months.
• AXA Asia Pacific Holdings (AXA) announced inflows in Australia and New Zealand (A&NZ) exceeded $10bn for the first time helped by Howard’s superannuation changes. Funds under management in A&NZ also grew by 22% to $93.68bn in the 1H. Hasn’t done much for the share price, AXA down 4c today to 773c.
• Territory Resources (TTY) will decide by the end of the week if they are going to make a counterbid to the 330c cash bid for Consolidated Minerals (CSM) from Pallinghurst Investors. TTY down 2c to 110.5c and CSM up 5c to 347c.
• PBL’s Crown Las Vegas consortium has lodged documents with the Nevada Authorities to build the tallest casino in Las Vegas. 575m tall (the Sydney Tower is 304m). Higher than the Empire State Building and the Sears Tower. PBL’s joint venture Melco Entertainment closed lower overnight and is still 30% from its IPO price. PBL down 25c to 1915c.
• The A$ has risen for 12 days on the trot – the longest winning streak since it floated in 1983. It is up 17% in 12 months hitting US88.41c this morning.
• Some mild talk of an interest rate rise after the slightly higher than expected Producer Price numbers yesterday but nothing too worrying. The main driver will be the CPI (inflation) numbers tomorrow.

Michael West in The Australian makes a good point about Basis Capital – the hedge fund that is about to lose its investors half their money thanks to their exposure to the subprime mortgage market in the US. Their April 2007 prospectus says the first step in their process is to “identify mispriced securities”. They certainly did that. They found the mispriced US junk bond market. Only problem is…it was too expensive not too cheap. The press also makes the point that something is wrong with the Ratings agencies for handing out top ratings to the Basis funds and with the industry for giving them so many awards. Just who can you trust?

I have an article in Marcus Today today about the Taboo subject of money. As a white Anglo Saxon male I sometimes despair that I wasn’t born into some sort of religious, ethnic or old boy club that puts me in contact with people that openly discuss financial strategies for the betterment of all its members. I once tried to get a job at such an institution, but Macquarie didn’t want me (their loss).

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