The market is up 55. The SFE Futures suggested a 44 point rise in the market this morning. The ASX 200 fell 124 points yesterday. The core reason appears to be the removal of a large buying program that had supported the market for a few days against the US trend. In other words the Future Fund buying stopped, the SPI contract premium dropped to the bottom of the range and the index arbitrage took over – selling stocks and buying futures.
The Dow Jones was up 90 moving in a 174 point range and closing higher for the first time in four sessions ahead of the Federal Reserve’s decision on interest rates tonight. There was plenty of takeover activity overnight helping to push the market higher. Guitar Centre closed up 20% after accepting a $1.9bn cash offer from private equity, People’s United Financial Inc. announced it would offer $1.9bn to buy Chittenden Corp. and Andrew Corp. finished (10.9%) higher after accepting a $2.6bn bid from CommScope Inc. Energy stocks had a strong session after a 1.7% rise in the oil price and in economic news, the Commerce Department said orders for durable goods fell 2.8% in May – 2% weaker than expected and the first fall since January. The NASDAQ had a good session closing 1.2% higher.
Resources recovering well today after yesterdays big falls…BHP up 28c to 3448c (down 61c yesterday) and RIO up 32c to 9667c (down 254c yesterday). Metals mostly up overnight, Copper up 0.1%. Nickel up 0.3% and Aluminium up 0.2%. Zinc down 1.5%. Zinifex up 16c to 1845c (down 32c yesterday). Oil price up $1.20 to $68.98 after the Energy Department reported an unexpected fall in US gasoline inventories last week – first drop in 8 weeks. Woodside up 85c to 4525c (down 129c yesterday). Gold down 50c. Newcrest up 6c to 2292c (down 71c yesterday).
We have an FOMC meeting and US Q1GDP numbers in the US tonight (preliminary GDP number was up 0.6%). There is some fear that the FOMC might tighten their rhetoric – implying a rate rise before the end of the year – two months ago the market was expecting a cut. A volatile market at the moment – all over the place. Making short term money out of the market at this stage is all about predicting the herd…Good luck with that.
- Coates Hire (COA) are setting up a “due diligence process” for firms interested in bidding for them. They recently announced a private equity approach and a strategic review. They are opening a data room on July 16th for four weeks. They say “a formal assessment of indicative proposals by means of a due diligence process will give us a better understanding of the value of available offers”. COA up 14c or 2.52% to 570c. Three bidders mentioned in the AFR today.
- Consolidated Minerals (CSM) is currently under offer from Pallinghurst Investor (a consortium headed by EX BHP CEO Brian Gilbertson). They have now received an incomplete offer from Territory Resources (TTY) which is offering 150c cash plus 1.5 TTY shares (worth 148.5c or 222.75c for 1.5 shares). Total bid worth 372.75c. This compares to the Pallinghurst agreed bid worth 282c (which they upped this week by 30c). CSM now 315c up 13c this morning.
- Fosters (FGL) down 4c to 626c on the late news yesterday that they are about to receive a $548.7m tax assessment from the tax office. They are objecting. One broker has knocked 25c off their Fosters valuation on a worst case scenario because of the issue. They suggest a 5-10c outcome is more likely.
- Transfield (TSE) rebounding 40c or 3.7% to 1115c today on the back of yesterdays fall when it announced a 275c a share offer for GRD Ltd (GRD). Talk is that it will be a tough ride and that they’re likely to face resistance from Seven Network (SEV) who own 10.4% of the company. GRD up 2c to 283c.
- BlueScope Steel (BSL) announced the US$190m sale of its North American Vistawall Business. The market seems to think it’s a smart move, the stock is up 17c to 1028c.
- Telecom Corporation (TEL) up 4c to 406c after appointing Dr Paul Reynolds as CEO, effective from late-September this year. On the back of the announcement, Citigroup say a exodus of management is “inevitable”.
- If you are worried about the market then worth highlighting the rather flat performance from most of the major banks recently and some of the financials – the banks are the obvious defensive sector.
In the Marcus Today newsletter today we look at why the market fell over yesterday and publish the numbers on the financial stocks. The Rinker risk free arbitrage is still in full flight although the arbitrage profit is narrowing with the fall in the A$ and RIN at 1890c. You could have done it at 1854c this week. A$84.02.
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