Morning Market Report

Thursday, 15 November 2007

Morning Market Report

Marcus Padley, sharemarket analyst and author of the Marcus Today daily newsletter, reports:

The market is up 17 after starting the session in negative territory. The SFE Futures suggested a 12 point fall in the market this morning.

The Dow Jones closed down 76 overnight – It moved in a 169 point range and finished lower on back of credit market concerns and earnings downgrades. The session was going well up until E*Trade Financial CEO Mitch Caplan appeared on CNBC and frightened investors about the company’s problems resulting from losses in its $2bn portfolio of mortgage debts. Britain’s HSBC Holdings also worried Wall Street saying it will have to write down a further $3.4bn in the 3Q because of its US subprime exposure (not quite the $10bn rumoured), adding to the billions already written down earlier this the year. Despite yesterday’s big 319.5 point gain, today’s fall proves the market remains concerned about the consequences of the credit crunch and a US recession. There was some good news from Bear Stearns, the CEO said the company’s leveraged finance business was improving that he expects to write down $1.2bn worth of bad debts in the 4Q, lower than the market had expected. Macy’s Inc. fell 7%, the most in 5 years, after announcing same-store sales will disappoint in the 4Q and that revenue will come in lower than expected and Target fell 5% after Merrill Lynch cut their recommendation to “neutral” from “buy”. The NASDAQ lost just over 1%.

Resources performing OK despite BHP down 14c to 4204c and RIO down 91c to 13660c. Metals performed strongly overnight. Copper up 2.9%, Aluminium up 1.2% and Zinc up 0.9%. Nickel down 0.8%. Zinifex up a big 12% to 1624c on bid talk (see below). Oil price up $2.84 to $94.02 on expectations that a government report will report a 4^th consecutive fall in US crude inventories in the US tonight.

Zinifex was up 208c to 1648c this morning on talk of a bid from Oxiana. Now 1600c up from 1440c. Terms are rumoured as 4 OXR plus 400c for 1 ZFX. OXR is up 6c to 406c. Would make the bid worth 2024c.
Woodside down 4% to 4990c after telling investors at its annual investor presentation they expect to produce between 80m and 86m barrels of oil equivalent in 2008 – down from 101m.
St George Bank (SGB) is down 3% this morning after announcing a $766.5m capital raising – they are placing 21.9m new shares at $35 with institutions. “The additional capital puts us in a strong position to take advantage of the growth opportunities we are currently seeing in the market”. SGB was 3820c before the placement. Now 3704c.
Lend Lease shareholders received good news at the company’s AGM – CEO Greg Clarke said it’s targeting pre-tax earning growth of 15-20% a year and that EPS had grown by 26% compared to average growth of 10% a year, in the past 5 years. Clarke said the company has a strong balance sheet but has a lot of work in the next 4 to 5 years to executive its strategy. LLC up 34c to 1949c.
Fortescue rebounded after reassuring investors that they remain on track to deliver its first iron ore shipment by mid-May next year. Moody’s Investors Services are uncertain about the completion deadline of FMG’s iron ore project and recently cut FMG’s debt rating to Ba3 to B1. FMG up 345c or 7% to 5508c.
Equinox up 4% on some uranium drilling results. (A copper and uranium exploration stock with a project in development in Zambia).
Perilya Mining (PEM – zinc stock mainly) is up 6% on “Excellent New Drill Intercepts at Mount Oxide Copper Project”.
Arrow Energy (AOE) have placed 43m shares at 280c. The issue was oversubscribed and came in at the top of the expected range. Price now 303c. Good demand for the stock.
Timbercorp (TIM) is hardly changed on 2007 final results.
Companies going ex-dividend include CDL, CPK, IPA and VRL.
AGMs still going– main ones include: Wesfarmers, Seven Network, Lend Lease today