The market is up 42. The SFE Futures suggested an 11 point rise in the market this morning.

The Dow Jones was down 53 overnight – It moved in a 142 point range and finished lower for the first time in five sessions on concerns about the subprime mortgage market, on the back of OKish CPI numbers and despite some reasonably positive comments from Federal Reserve Chairman Ben Bernanke about the economy. As part of the Federal Reserve’s midyear forecast, Bernanke spoke before the House Financial Services panel saying he expects the economy to strengthen in 2008 despite warning the housing sector could get worse before it gets better. He also highlighted inflation saying it’s the Fed’s “predominant” concern. Bear Stearns closed down after announcing their two hedge funds, that had been struggling because of wrong-way bets on the direction on the mortgage market, were basically worthless. That promoted downgrades in other subprime exposed investment banks. In economic news, the Labour Department announced the Consumer Price Index increased by an expected 0.2% in June (the slowest growth rate in 5 years), and the Commerce Department said home construction increased by a lower-than-expected 2.3% last month. The NASDAQ closed 0.5% lower, eBay closed slightly down despite reporting a 50% increase in net profit of $375.8m.

Resources doing OK today despite overnight falls in resources stocks…BHP up 14c to 3757c and RIO up 1c to 9701c. Metals mixed overnight, Nickel up 2.2% and Copper up 0.8%, Zinc and Aluminium both up 0.4%. Zinifex up 6c to 1995c. Oil price up $1.00 to $75.03 after US Department of Energy announced an unexpected fall in gasoline stockpiles, despite a bigger-than-expected increase in refinery operations. Woodside up 77c to 4648c. They have announced a 9% increase in production for the 2Q. Gold up $7.80.

Good start to the day after yesterday’s falls. The market is finding strong resistance at the 6400 level. A break through 6400 will cause an explosion in technical BUY recommendations on the market. ASX 200 now 6366. There is an RBA bulletin today which should update us on the RBA’s lack of conviction either way on interest rates. Their current stance is that they are mindful of inflation breaking out…but it isn’t. They are on “data watch”. Glenn Stevens (RBA Governor) gives a speech today “The Asian crisis – A Retrospective” – unlikely to deliver much new news.

  • RIO up 1c to 9701c after their 2Q production numbers described by Merrill Lynch as just below expectations and by JP Morgan as in line with expectations. Macquarie makes a few interesting points on RIO today saying the short term price is likely to struggle because the chances of a capital management initiative have faded since the Alcan bid, their buyback has been suspended and they may need an equity issue. Macquarie have also downgraded Oxiana to NEUTRAL from BUY today.
  • Woodside up 77c to 4648c on the back of their 2Q production numbers. Q2 production up 9% year on year (up 17% H1 on H1) but down 6% on the last Q after reduced output at the Chinguetti field in Mauritania.
  • Macquarie Bank AGM – the share price is up 110c to 9200c after the announcement of their AGM this morning. It is all very upbeat but lacks specific earnings guidance other than the 1Q being substantially up. Main points from it include: good equity and commodity markets, considered moving the head office but decided to leave it in Australia, strong growth being experienced across the group, and are establishing a Non Operating Holding Company to house all the non-banking assets (bit complex) The market had perhaps been expecting an earnings guidance upgrade. Despite that, the rhetoric is very positive.
  • Macquarie Infrastructure Group (MIG) announced this morning they will be jointly bidding for 4 Mexican toll roads with a Mexican infrastructure company called, wait for it, Impulsora del Desarollo de America Latina (IDEAL). The bid is structured as a 60:40 partnership between IDEAL and MIG respectively. MIG up 1c to 350c.
  • Newcrest flying this morning (up 48c to 2434c) on a rise in the Gold price and the announcement of a copper gold JV in Fiji with Japanese firms Nittetsu Mining Co and Mitsubishi Materials Corp. You may be wondering what impact that has on Newcrest. Their chart tells you that you needn’t bother doing detailed analysis on Newcrest. Just guess the gold price outlook (which is very positively correlated with the Gold price and negatively correlated to the US$).
  • Talk is that Pallinghurst is threatening to withdraw their bid for Consolidated Minerals (CSM) after the scheme meeting on the deal was adjourned in light of the Territory Resources (TTY) rival bid. Pallinghurst Chairman Brian Gilbertson told The Australian he is not exactly happy with the delay and wants to remind CSM he is entitled to a $5m break fee. CSM up 1c to 341c and TTY up 3c to 104c.
  • News Corp have managed to get the board of the Dow Jones company to recommend their $5bn bid but the Bancroft family is said to be divided. They meet on Monday for a briefing on the deal – they will then take a few days to decide if they also want to back the deal. They own 64%. “The Bancroft family members are descended from Clarence Barron, a Dow Jones correspondent who bought control of the company in 1902. Over the years, family ties to Dow Jones have become more remote, and no Bancroft is involved in its day-to-day operations” (source AAP) – NWS down 1c to 2797c this morning.
  • Cochlear up this morning on a Citigroup recommendation.
  • Kimberley Diamonds (KIM) up 29% after a bid from the UK this morning. Small relief to suffering shareholders. The bid is at 70c. The price was 196c just over a year ago.
  • CFS Retail Property Trust (CFX) down 8c to 214c. They raised $600m in convertible notes; they need to pay for their share of the acquisition and development of the Myer Melbourne site.
  • UBS Warburg upped their target price to 630c on after the sales numbers yesterday and have maintained their “Buy” recommendation. They reported an expected (bit below expected) 9.5% increase in like-for-like 2Q sales. They continued their European expansion and are expecting a strong FY result helped by sporting events such as the soccer World Cup last year. HVN up 4c to 546c.
  • Perilya (PEM) down 14c to 495c after their production numbers today.

Lots of broker research this morning on David Jones (DJS) after they reported a strong FY07 trading update yesterday. UBS Warburg upped their target price to 505c from 460c but cut their recommendation to “reduce” from “neutral”, saying the share price has had too good a run of late. DJS down 2c to 559c. Citigroup also has a SELL with a 415c target price up from 395c. They say “The shares trade at a premium to the market and international peers, which we view as unjustified”.

  • The Chinese government will release a heap of economic data at midday. (GDP, CPI, PPI and retail sales numbers) Economists are expecting the economy to have expanded by huge 11% in the 2Q, increasing the chances of their central banks raising interest rates for the third time this year to reduce inflationary concerns.
  • A$ at an 18 year high hitting 87.90.
  • Bond markets up — the 10 year yield down to 5.03% from 5.07%.

I have an article in the Marcus Today newsletter today with 10 rules for managing your portfolio. It is all about having a plan, having a plan, having a plan.

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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