The market is up 39. The SFE Futures suggested a 41 point rise in the market this morning.

The Dow Jones was up 45 on Friday and moved in a 96 point range and closed higher on the back of takeover activity and better-than-expected unemployment numbers. Advanced Medical Optics made a $4.34bn offer for Bausch & Lomb, Macy’s Inc. had a strong session on speculation that it would be the next takeover target, and Chicago Merchantile Exchange Holdings Inc. upped their bid for rival CBOT Holdings. There have been more than $1.4 trillion in US mergers and acquisitions in 2007. In economic news, the unemployment rate remained at 4.5% in June for the third straight month and the Labour Department announced that a higher number of jobs were created in April and May than in previous months. It was a solid week for all three major indexes, the Dow Jones closed up 1.51%, the S&P 500 finished 1.8% higher and the NASDAQ put on 2.43%. The ASX 200 was up 1.21%.

Resources doing well today. BHP in record territory, up 83c to 3837c. RIO up 74c to 10279c. Metals mostly up on Friday. Zinc up 0.6% and Aluminium up 0.8%. Nickel down 2.3% and Copper was unchanged. Zinifex up 73c to 2101c this morning on talk of a merger with Oxiana. Oil price up 99c to $72.80 on concerns the kidnappings and unrest in Nigeria will affect supply. Woodside up 37c to 4737c. Gold up $4.20. Newcrest up 20c to 2323c.

A bit of a thin Diary this week. On the company front about the only event is Woolworths’ 4th Q sales numbers on Tuesday, apart from that there are a few routine economic numbers but that’s about it. It is three weeks until the results season starts. Any company that thinks it is going to surprise on the upside or the downside will be telling us about it so we may see more profit warnings and upped earnings guidance. The currency stocks are obviously at risk. The market has started the week well and is up 0.5%. BHP, ZFX, Equinox and SEK all hitting 52 week highs.

  • Zinifex (ZFX) is up and about after Citigroup released a piece of research suggesting Oxiana (OXR) would consider a merger with them and that they are not the only company that would be interested once Zinifex spins off their smelter business. ZFX up 12% in the last week. The story broker last Thursday.
  • Might be time to look at Wesfarmers and Coles after the recent falls. On the rise today. One journalist predicts WES will be back to its peak of 4573c by the time the Coles bid goes through in October. WES now 4144c up 39c today. It was $36 before the bid. Woolworths’ 4th Q sales numbers tomorrow could have some implications for Coles.
  • Qantas (QAN) said they plan to buy 20 more Boeing 787s to add to 45 they already ordered. The economically friendly B787s will allow Qantas and Jetstar to expand more rapidly in the Asia-Pacific region. QAN down 2c to 557c.
  • Some suggestion Tabcorp (TAH) will announce its new CEO this week after a shortlist of seven candidates went to the board last week. This comes after they sacked Matthew Slatter after four years in the job. The appointment is very likely to be internal candidate and current acting CEO Elmer Funke Kupper. TAH up 5c to 1720c.
  • ANZ Banking Group (ANZ) announcing this morning they had bought a 10% stake in Vietnamese investment banking and securities business Saigon Securities for $110m. The acquisition adds to their retail and institutional operations in Vietnam but is unlikely to have much impact on earnings. ANZ down 7c to 2332c.
  • There have been a few broker upgrades for Sonic Healthcare (SHL) this morning after they announced the acquisition of Sunrise Medical on Friday. The general consensus is that they have paid a fair price for a business with good growth capabilities but it isn’t an acquisition that will immediately result in any outperformance. SHL up 24c to 1537c.
  • Golden State Resources (GDN) down 6c or 15% to 34.5c after disappointing with their drilling results. The stock is down 73% since April.
  • Capral Aluminium (CAA) down 8c or 12% to 58c after announcing a profit downgrade thanks to a weakening residential market and increased restructuring costs. They are now expecting a 1H loss of around $19m, compared to $13m previously projected.
  • Boral (BLD) down 18c or 2% to 848c after Deutsche Bank said ongoing weakness in the US housing market will hurt BLD’s bottom line. They have a SELL recommendation and a 698c target price.
  • Macquarie joins some of the other brokers today with the prediction that the nickel price is going to have a correction. It is already 26% off the top. Usual reasons, building stockpiles of stainless steel scrap, softening demand, substitution.
  • ANZ Job Ad numbers for June fell 0.8%, bit flat. Still up 36.1% on the year. Was up 10.3% in May. Unemployment has been hitting 32 year lows.

The Rinker risk free arbitrage is still on the go although it has narrowed from 1850c last week to 1895c up 4c today. You can buy 2000 shares and sell them to Cemex at 1950c. There are still thousands of 2000 share trades going through in Rinker as people take advantage of it. If you want to know any details (and we are fielding a lot of questions) call the Cemex hotline – they are all geared up for it on 1300 721 344.

We have an article in the newsletter today called “The Meaning of Life”. It looks at “Rich and Happy” and whether they are related.

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Peter Fray

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