The market is down 5. The SFE Futures suggested a 17 point fall in the market this morning.
The Dow Jones was down 58 – It moved in a 101 point range and closed lower on the back of weaker-than-expected economic numbers and investors cashing in, in what has been the Dow’s best month since 2003. Retailers closed lower across the board after the Commerce Department said consumer spending eased in March, Target and Home Depot were hit the hardest. In takeover news, US options exchange International Securities Exchange Holdings agreed to a $2.8bn offer from German stock exchange operator Deutsche Boerse. The Japanese markets were closed for a holiday, but the Chinese market was full steam ahead, it hit record highs on strong corporate earnings. The NASDAQ closed down 1.3%; interesting to note that it gets 41% of its value from computer shares. It was a great month for the 3 main indexes; both the S&P 500 and the NASDAQ finished 4.3% higher, the Dow pushed 5.7% higher.
The US has had a great results season. Worth mentioning however that it is normal for the US market to peak in the middle of a results season as raised expectations are only met not beaten and as people look forward and see a news vacuum ahead.
Meanwhile in our market – Resources are struggling to hold up today…BHP down 37c to 2314c and RIO down 121c to 8166c. Metals mostly up overnight. Both Copper and Aluminium up 0.2%, Zinc up 2.2% and Nickel down 1.5%. Zinifex down 3c to 1646c. Oil price down 67c to $65.78 on warmer-than-expected weather in the northeast of the US. Woodside up 18c to 3353. Gold up $1.70. Newcrest down 43c to 2283c – still responding to the disappointing production numbers yesterday.
Another huge month for the markets in April, All Ords up 3.0%. At that rate the market is going up 42.5% pa on an annualized basis. No wonder people are getting a bit nervous…it is hard to ignore that natural feeling of “mean reversion” – that everything returns to the average, that what goes up must come down. Industrials leading the way, up 3.25% this month and outperforming resources up 1.85%. But the main story of April is the Bank sector up 4.28% ahead of its results season which just started this week.
- The big news this morning is Symbion Health (SYB) announcing it had received a takeover approach from a Healthscope (HSP) led consortium valuing the company at $2.78bn, a 4.6% premium to its 411c closing yesterday. The offer involves both cash and shares and if successful, Healthscope would take Symbion’s pathology and diagnostic business, while Ironbridge and Archer would take control of SYB’s pharmacy and consumer businesses. SYB up 20c or 4.87% to 431c. HSP down 4c to 562c.
- Santos (STO) is well up after the South Australian government announced it would review the 15% shareholder restriction which opens the door for a takeover. The outcome of the review is due September 2007 but would they want to review it if their not thinking of changing it. The stock is up 28% since early March when the market was anticipating M&A activity. STO up 53c or 4.72% to 1177c. The broker comment this morning is that the 28 year old 15% cap is not appropriate any more and is very likely to be removed. (Interesting to think that it was put in place to protect Santos from leveraged buyout merchants like Alan Bond and that it is now being removed because the company want to provoke interest from the leveraged buyout merchants).
- St. George Bank (SGB) reported an impressive 15% increase in 1H profit to $568m, slightly better than the $566m expected. The company reaffirmed its FY08 target of 10% EPS growth and set an 82c 1H dividend, up from 74c a year ago. SGB up 3c to 3604c. The stock is behaving a little like ANZ did on its results. Good number, no price reaction. Probably done too much ahead of the announcement.
- Fosters Group (FGL) announced plans to go head to head with Lion Nathan (LNN) in the fast-growing mid-strength beer market. VB Mid is the first extension of the VB Brand and will hit the shelves tomorrow. Both Fosters and Lion Nathan have been concentrating on mid-strength market to counteract flat sales of traditional beverages. FGL up 4c to 643c and LNN up 8c to 923c. Fosters fell 5% last month on talk that the company had been in preliminary takeover talks but they had ended with no agreement/interest.
- Corporate Express (CXP) up 3c to 725c today after closing 3% higher yesterday ahead of its 1Q results on Thursday. The AFR on Friday said there is a chance that its Dutch parent Buhrmann might buy it out. Goldman Sachs JBWere has tipped a 9% rise in 1Q EBIT to A$22.2 million.
- Newcrest (NCM) betting belted again today after cutting its FY07/08 profit forecasts at Telfer yesterday because of weather problems. Citigroup cut its target price to 2540c from 2650c.
There are a lot of rather populist comments around that the market is too high and must correct. We have an opinion in the Marcus Today newsletter today on what we think you should do.
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