The market is down 39 (off its lows). It was down over 70 points early on. The SFE Futures suggested a 79 point fall in the market this morning.

The Dow Jones was down 129 moving in a 155 point range and closed down 1%. No relief from bond markets. The 10 year bond yield hit a five year high of 5.29% on a number of factors including strategy comments suggesting bonds are expensive versus equities and need to adjust and on expectations that China and UK central banks will increase interest rates to fight off inflation. To make matters worse, former Federal Reserve Chairman Alan Greenspan predicted an increase in benchmark yields and higher debt premiums. Stocks closed down across the board, particularly home builders (Toll Brothers, Centex Corp., KB Home, Lennar Corp.) which fell more than 2% and energy stocks after a 1% fall in the oil price. Wall Street is understandably becoming concerned that higher interest rates will affect mergers and acquisition activity which has helped push the market to record levels this year. The NASDAQ finished 0.9% lower and is now down in five of the past six sessions.

Resources down along with everything else. BHP down 49c to 3287c and RIO down 76c to 9149c. RIO have analyst visits going on most of the week with the focus in the first day on iron ore and their plans to expand production beyond 2009. Metals all down overnight. Aluminium down 0.9%, Copper down 2.6% and Zinc 1.1%. Zinifex down 11c to 1801c. Nickel down a big 6.1%. Oil price down 57c to $65.36 on the back of expectations that a government report will show increases in inventories and refinery efficiency. Woodside Petroleum down 50c to 4265c. Gold down $5.90. Newcrest down 37c to 2303c.

Complete opposite to yesterday…market down 70 and rising instead of up 60 then falling. Volatility is really starting to pick up led by an erratic US market moving 1% in both directions since Friday (down 199, up 157, down 129). Nickel stocks are all down today on the back of the Nickel price falling 6%.

Not really much to go on in the news department:

  • One of the issues this morning is the impact of floods on insurance companies. Insurance Australia Group (IAG) said they expect it to cost $169m (9,000 claims) and Suncorp-Metway (SUN) don’t know the cost yet (11,500 claims). SUN down 23c to 2065c. IAG down 7c to 583c. QBE say its estimated net claims are “within the company’s allowance” for large losses and catastrophes and shouldn’t impact earnings guidance (QBE have small exposure in personal lines – less than 250 claims). QBE down 3c to 3102.
  • The AFR has reported this morning that Woolworths (WOW) is looking to buy the Kmart stores in NZ owned by Coles (CGJ) if their bid for the Warehouse Group (WHS) fails to eventuate. The suggestion is that they will deal with the buyer of Coles to take control of all Kmart stores but their preferred option is acquiring the Warehouse Group. WOW down 30c to 2675c and is down 8.5% since 12 April. As a high PE stock it seems to have lost if “defensive” tag.
  • Transfield Services Infrastructure Fund (TSI) made an impressive debut yesterday closing at A$2.26, 7.5% higher than its 210c issue price. The A$602 million spin-off from Transfield Services (TSE) has stakes in 5 power stations and 2 water filtration plants. TSI up 8c to 235c today.
  • Westfield Group (WDC) announced a $3bn rights issue yesterday after market. It is a 2 for 23 at 1950c against the price at 2090c. They are issuing another 8% of their shares. WDC unchanged at 2090c despite some brokers suggesting it would weigh on the price.
  • Goldman Sachs JBWere says Fosters Group (FGL) is trying to limit their debt and achieve a BBB+/Baa1 credit rating by FY08. Debt currently stands at $2.9bn and is headed south. FGL announced yesterday the sale of the Kent brewery for $208.3. FGL down 5c to 646c.
  • ANZ Banking Group (ANZ) down 10c to 2892c. The word from Hong Kong is that the CEO elect Michael Smith is highly regarded with his Asian division delivering 65% of HSBC’s total profit growth in the last three years.
  • MFS Limited (MFS) down 28c or 4.63% to 577c today despite issuing a Business Update.

In today’s edition of MARCUS TODAY we have an article titled “Trouble with metals” talking about what has gone wrong with the Nickel sector of late and what the future has in store. We also have an article called “Getting Defensive” which looks at the stocks most at risk in a market downturn. We list defensive stocks but the truth is that in a falling market… Cash is King.

THE MORNING MARKET REPORT is provided by the MARCUS TODAY daily stockmarket newsletter. You can subscribe for a free five day trial here.

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