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Morning Market Report

Apr 27, 2012

Markets drop after Spain's credit rating's cut

Standard & Poors’ has cut Spain’s credit rating this morning. The Dow futures dropped from being up to down 41 on the news.

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The market is down 1. The SFE Futures were up 18 this morning.

The Dow closed up 114 and was up 137 at best. The S&P 500 closed up 0.67% and the Nasdaq up 0.69%. Standard & Poors’ has cut Spain’s credit rating this morning. The Dow futures dropped from being up to down 41 on the news. Metals were up on the LME. The gold price was up $18.20 to $1660.50. Oil up 6¢ to $104.02. The Australian dollar is currently buying 103.67¢. Consumer discretionary stocks were best in the US, up 1.25%. Materials and Healthcare underperformed. Ten-year US bond yields dropped to 1.939%.

Main points:

  • Macquarie Group (MQG) reported a net profit of $730m down 24% after earnings were hit by weaker conditions in global markets. The result was in line with analyst expectations of around $726m and above the company’s guidance of $717m. The company expects to achieve better results in the current fiscal year as long as market conditions improve. Final dividend of 75c down from $1. Staff numbers have been reduced to 14,202 from 15,088 reported last September. MQG is up 2.57% to 2916c.
  • JB HiFi (JBH) announced another profit downgrade as margins have been impacted by heavy discounting. They now expect to post a profit of $100m-$105m in the year to June 30 down from a consensus of $120m. The company said they expect to meet their fiscal 2012 sales target of about $3.1bn. JBH is currently yielding 7.1% and has a PE of 8.8x. JBH is down 5.23% to 1015c. .
  • Atlas Iron (AGO) shipped 1.21Mt of iron ore during the March Q which was in line with guidance. The company remains on track to ship 5.5Mt-5.7Mt with cash operating costs remaining consistent with guidance for the 2012 year of $42-$45 per ton. AGO has entered into a binding MOU with QRN to progress a feasibility study for a railway line in the Pilbara region.
  • ResMed (RMD) reported 3rd Q results above consensus after strong growth in masks. Profit of US$64.6m up 21% above the expected US$59m and EPS of US43.9cps up 30% and above the consensus of US39.3cps. No earnings guidance was given. RMD is up 4.87% to 323c. Sundance Resources (SDL) has reached an agreement with the Cameroon Government on key terms underpinning the Mbalam Iron Ore project. With support now gained from the Republic of Congo and the Cameroon Government, the decision rests with Hanlong Mining on whether they will follow through with their takeover offer of 57c per share.
  • Spotless Group (SPT) has requested their shares be places in suspension pending takeover discussions with Pacific Equity Partners (PEP). Both sides were hoping to announce a deal today but it seems negotiations are taking longer than expected and an announcement will be made Monday 30 April. SPT is in suspension.
  • PMP has received a takeover bid worth $252.5m from an unnamed party. It is a highly conditional non binding offer between 68c-78c compared to PMP’s close last night at 28c. PMP rejected a private equity approach in Feb 2007 at 195c-215c saying it was too low. PMP is up 128% to 57c.

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