The market is down 13. The SFE Futures suggested a 29 point fall in the market this morning.

The Dow Jones was down 80 moving in a 120 point range. It was down 125 at one point and closed lower mainly on the back of comments made by Federal Reserve Chairman Ben Bernanke to an international monetary conference in South Africa. In his speech by satellite, he said inflation is “ebbing” but remains a problem suggesting interest rates are unlikely to be cut any time soon. In takeover activity, Avaya Inc. accepted an $8.2bn offer from private equity firms Silver Lake and TPG Capital and retailers closed lower after home goods seller, Bed Bath & Beyond Inc. announced they’re likely to report lower-than-expected 1Q earnings. The NASDAQ closed 0.3% lower; Google Inc. hit an all-time high of $518.84 after they signed an agreement with Inc. to cooperate on online advertising.

Resources mixed today…BHP up 22c to 3315c and RIO down 12c to 9600c. Metals all down overnight, Copper down 1.1%, Zinc down 1.7% and Nickel 3.1%. Zinifex up 18c to 1813c. Aluminium 0.8%.

Oil price down 54c to $65.63. The Energy Department said demand remains strong with total implied fuel demand in the US averaged 20.9m barrels a day in the four weeks ended May 25. Woodside down 6c to 4416c. Gold down $1.10. Newcrest up 10c to 2345c.

RBA LEFT RATES UNCHANGED – no surprise and no statement, some brokers saying the tightening bias remains and that rates could go higher in H2 2007 or early 2008. The chances of a 25bp rate hike in July are now 5%. We have had Australian Q1 GDP numbers this morning. Q1 up 1.6% QonQ and 3.8% YonY. This is quite a bit stronger than the 1.2% and 3.1% expected. Tends to suggest interest rate rises are more likely. Good for the A$ which has jumped to 84.16c.

US RATES – on the back of the Bernanke comments overnight the chances of a rate rise in US by November are just 10%. Bonds hit a nine-month low and Goldman Sachs are now saying there will be no rate cut in the US in 2007 having previously forecast a cut.

  • Aristocrat Leisure Ltd. (ALL) down 24c to 1541c after their chief executive Paul Oneile said they are pinning their hopes on new and emerging markets to drive earnings growth this year and beyond. They have forecasted 2H NPAT of between $120m and $125m, up from $104.7m in the 1H on the back of a turnaround from its Japanese operations and growing sales in Europe and Asia. Aristocrat made 70% of its revenue of A$1.09 billion last year outside Australia.
  • BHP Billiton (BHP) announced Chris Lynch, manager of their carbon steel materials division, will retire early in the new financial year. Talk is that he was in the running for the top job, but Marius Kloppers beat him to it.
  • UBS Warburg have upgraded Boral (BLD) earnings by 8% this morning. They have a 1070c target price and an unchanged BUY recommendation. Yield 5.4%…helps. PE 17.7x falling to 14.3x on 23% earnings growth. Reasonably solid fundamentals relative to the rest of the sector but until the US housing market sentiment turns the sector will likely remain in the doldrums. BLD up 10c to 930c.
  • Toll Holdings (TOL) spin off Asciano (AIO) listed today at 11am. Their shares opened at 1060c. Credit Suisse have an 856c target price on AIO saying it “offers exposure to the largest container terminal business in the country, as well as the only nationwide rail provider for intermodal freight”. TOL’s share price has adjusted as a result of AIO listing (trading ex AIO) and is down 42% to 1358c.
  • Oxiana (OXR) up 3c to 353c after Goldman Sachs JB Were upgrading their earnings forecasts and copper price forecasts yesterday. There is talk of Xstrata looking to make an acquisition in the copper sector. The Australian also reported on speculation that Canada’s Teck Cominco is interested.
  • Metcash fell 7% on its results yesterday confirming the retail sector is a bit on the nose (after profit warnings from Specialty Fashion Group, Noni B, a denial of the need for a profit warning from Just Group and the poor Coles sales numbers). MTS downgrades around this morning. One broker says it is a solid business.
  • Aditya Birla (ABY) up 11c to 294c this morning after being described by UBS this morning as the cheapest copper play in the market.
  • The AFR reported today that Eddy Groves (joint managing director) of ABC Learning Centres (ABS) has increased his shareholding, he bought 1m shares at $7.17 a share and then a further 1m at $7.25 share. (on market) He now has 17,797,500 shares to his name, his interests are clearly in line with those of ABS’s shareholders.

In today’s edition of MARCUS TODAY, we have an article titled “Very Strong Upgrade Cycle”, a must read for anyone thinking the resource sector has had its run.

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