The market is down 25. The SFE Futures suggested a 2 point fall in the market this morning.
The Dow Jones was up 48.3 – It moved in narrow 57 point range and closed in record territory for the fifth consecutive session on the back of takeover activity and impressive earnings results. Canadian aluminum company Alcan Inc. closed 34.5% higher after rival Alcoa Inc. made an unsolicited $27bn offer involving cash and shares. Better-than-expected earnings results, takeover speculation and a lower oil price helped the market record its longest winning streak since 1927. It has now closed up 24 times in the last 27 sessions. The NASDAQ closed slightly lower thanks to Yahoo Inc. giving up some its 10% gains from Friday. Markets in the UK were closed for a bank holiday.
Resources taking a breather today. After an 8.3% rise in a week BHP is down 39c to 3116c. After a 12.6% rise in a week RIO is down 99c to 9039c. BHP and RIO between them accounted for 22 points of the 33 point rise in the market yesterday. Obviously there is talk of a bid for RIO. Quite honestly the volumes in RIO weren’t really big enough yesterday to suggest anything more than speculative rather than real bid activity. The story has started because of the Citibank research yesterday looking at the possibility of a bid for RIO from BHP. Metals on the LME were closed overnight for a bank holiday. Oil price down 41c to $61.48 on the back of speculation that US refiners will increase output before the peak-demand driving season. Woodside down 18c to 4272c. Gold up 70c. Newcrest down 33c to 2280c.
It’s been a big morning for the market…
- The big story today is Publishing & Broadcasting (PBL) announcing it will split the company into two separate businesses. “Crown” will be the gaming company owning Crown and Burswood Casino and their 41.4% stake in the Melco PBL Entertainment JV, “Consolidated Media Holdings” (CMH) will be the media company which includes their 50% stake in PBL Media, 25% of Foxtel, 50% of Fox Sports, 27.1% of Seek and 100% of Ticketek. Shareholders will get a share in Crown a share in CMH and 300c in cash. PBL up 147c to 2220c (7.1%) and still going. The unlocking of value…and the cash helps.
- Qantas (QAN) has re-opened down 21c to 520c, not the huge fall that many expected suggesting the market thinks a revised/new bid at the same price might be around the corner. The APA released a statement this morning saying it would not pursue a legal case over shareholder acceptances and Qantas announced if a new offer did come along it would be “treated as a completely new matter”. Farce. Net impact, the bid has lapsed and Qantas is trading again. The liquidity in the stock will be high today and will then tail off. All those event traders that simply have to exit will be trying to do so now not later….may be best to leave your buying for a day or two. Most brokers say buy it below 500c which means it’ll never get there. Over half the shareholders think the stock is worth materially more than 545c. The independent experts said it was worth up to 598c.
- Alumina (AWC) up 29c to 4% to 762c on the back of Alcoa’s US$26.9bn bid for Alcan in the US overnight. Alcoa have a joint venture called AWAC (Alcoa World Alumina and Chemicals) with our own Alumina (AWC). AWC owns 40% of it and it is their main asset. There has been speculation of a bid for Alumina if Alcoa is bid for but the chances of that dropped recently when an available stake made its way into “friendly” hands. The AWAC joint venture will see benefits from the Alcoa purchase of Alcan.
- Alliance Resources (AGS) down 47c or 16.4% to 239c after announcing they got their initial resource estimate for 4 Mile West uranium deposit completely wrong. AGS hold a 25% free-carried interest.
- United Group (UGL) down 4c to 1674c despite announcing it had secured $300m worth of new contracts as a result of increased spending on water, defence and transport sectors.
- Oxiana (OXR) and Legend Mining (LEG) announced they have signed a Farm-In and joint venture agreement over its Mt Gibson Project which lies 100km south of Oxiana’s world class Golden Grive mine. OXR down 6c to 338c and LEG up 0.6c or 7.5% to 8.5c.
- Straits Resources (SRL) down 37c or 8.5% to 398c after their Non-Executive Chairman David Toms decided to retire.
The performance of the Resources sector in the last week since we wrote the article “CHEAP STOCKS” has been quite astonishing. MMX up 30%. Minara 17.5%. Fortescue 16.5%. Oxiana 14.7%. Mount Gibson 14.4%. Is RIO really worth 12.6% more this week than last week? It’s a frenzy…for a list of what PEs they are all on now see the Marcus Today newsletter.
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