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Morning Market Report

President Obama continued to call for US$1.6 trillion in higher taxes (to be implemented in two stages), while the Republicans have put a $2.2 trillion plan to the Democrats but are demanding that all the tax cuts enacted in 2001 and 2003 remain in place for another year.

The market is down 11. SFE Futures were down 14 this morning.

Dow Jones was down 60. The Dow was up 62 at best and down 66 at worst. Economic data out of Wall St was mixed and the ongoing uncertainty on the fiscal cliff is still overhanging the market. President Obama continued to call for US$1.6 trillion in higher taxes (to be implemented in two stages), while the Republicans have put a $2.2 trillion plan to the Democrats but are demanding that all the tax cuts enacted in 2001 and 2003 remain in place for another year. Obama is yet to respond. By all accounts the Republicans met his offer last week with laughter and disbelief behind closed doors. US ISM Manufacturing PMI number (49.5) disappointed (Est 51.2) but the construction spending (+1.4%) number was better than expected (Est +0.6%). There was encouraging news out of Europe last night with Spains Economic Minister Luis de Guindos saying Greek banks will need no more than 6 billion euros of EU funds to recapitalise the second phase of a euro zone plan to support their banking sector. Delays in hammering out the details of Greece’s next bailout instalment are causing some concerns although a bond auction plan offered some encouragement.

Worst US sectors  — basic Materials (-1.8%), Industrials (-1.0%) and Utilities (-0.6%). European markets mixed  — UK FTSE up 0.08%, German DAX up 0.40%, France up 0.26%, Spain down 0.57%, Italy up 0.43% and Greece up 1.27%.

  • RBA Interest rate decision out at 2.30pm today. There’s now a 90% chance of a rate cut factored into the futures market with 70% of economists expecting a cut and even some talk that after a series of weak economic numbers yesterday and no meeting in January we might actually be up for a 50bp cut on the basis that 25bp is unlikely to have any surprise value and therefore any impact.
  • Building approvals fell 7.6% in October, more than analyst expectations.
  • Stockland (SGP) —  Has issued another profit warning (last one in August) and now expects earnings to fall by 15% if the Victorian market fails to show any improvement. The company says the Victorian housing market has been stagnant since October and is unlikely to improve any time soon. An earnings fall of 15% is at the lower end of their previous guidance for a fall in the range of 10%-15%. SGP is down 0.88% to 337c.
  • GrainCorp (GNC) — US bidder AMD has increased their stake to 19.9% to stop any rival bidder trying to gain control, 5% of the company was bought overnight at 1220c a share. This is a 4% premium to the 1175c takeover offer which was rejected by the GNC board. AMD has also increased their takeover offer for GNC to $2.78 billion up from $2.68 billion. The new offer is for 1220c a share up from the previous offer of 1175c. GNC is up 3.35% to 1234c.
  • NextDC (NXT) — Has launched the float of Australia’s first listed data centre REIT called the Asia Pacific Data Centre (APDC) REIT. The trust is seeking to raise $88.55 million through an instalment offer. It will raise $54.02 million at IPO and a final instalment will raise $34.53 million. The trust is expected to pay annualised distribution yield of 9%. The stock is down 8% on the back of Deputy Chairman Bevan Slattery who has sold down from 23% to 14.6% of NXT to facilitate up to a $22 million investment in the APDC REIT. NXT is down 8.09% to 187.5c.

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