The market is down 23. The SFE Futures suggested a 35 point fall in the market this morning.
The Dow Jones closed down 56 overnight in light volume (London was closed overnight). The Dow Jones moved in a relatively narrow 82 point range and closed down for the first time in four sessions on the back of disappointing economic numbers and broker downgrades. Wall Street was reminded that the US housing market still threatens after the National Association of Realtors said sales of existing houses fell 0.2% in July to the lowest in 5 years, while house prices declined for a 12th straight month and the inventory of unsold houses hit a 16 year high. In takeover activity overnight, US Steel Corp. announced it would acquire Stelco Inc. for $1.1bn, ABB Ltd agreed to sell their oil and gas production plant for $950m to Chicago Bridge & Iron, and Gateway Inc. agreed to a $710m takeover from Acer Inc. The Home Depot closed slightly higher despite having to sell their wholesale distribution business to private equity for 18% less than they originally agreed. Wal Mart said they would evaluate possible acquisitions and new store formats in order to improve slowing sales growth. The NASDAQ had a down session finishing 0.6% lower.
Resources struggling today, BHP down 29c to 3728c and RIO down 72c to 9101c. Metals unchanged – LME closed overnight. London was closed. Zinifex down 10c to 1710c. Oil price up 81c to $71.98 on concerns that a struggling housing market might slow the economy further. Woodside down 24c to 4256c. Gold down $1.30. Newcrest down 37c to 2447c.
- Foster’s Group (FGL) going gangbusters this morning after their FY result and the absence of a rumoured profit warning. FGL up 30c or 5% to 360c. They also told us they have had numerous private equity approaches but nothing specific and the calls had all died away in the last 6 weeks. They announced a FY Net profit before significant of $716.1m, up from $612.9m a year ago. Merrill Lynch had forecasted $674m and Macquarie Bank $709m. Revenue was strong, up 5% to $4.76bn, up from $4.34bn last year and they also declared a final dividend of 13c a share from 11.75c last year, taking the FY dividend to 23.75c. Also in a surprise move, CFO Pete Scott said he will retire near the end of the current financial year. FGL shares performed OK – up 10% in the last 12 months helped a little by takeover speculation.
- Babcock & Brown Infrastructure Group (BBI) up 1c to 165c after announcing FY07 NPAT up 91% to $113m, up from $59.1m last year. Revenue $1.26bn, up from $810.4m. They declared a final distribution of 7.25c taking the FY distribution to 14.25c. Management are optimistic about the future, they expect distributions for 2008 to be around 15c and 16c for 2009.
- Ramsay Healthcare (RHC) down 29c to 1047c after receiving a number of valuation downgrades today on the back of their profit result yesterday. ABN AMRO cut their target price to 1230c from 1275c and UBS Warburg now have a 1315c target price, down from 1339c.
- Zinifex (ZFX) have received mixed reviews from brokers after their result yesterday. The interesting part of the ZFX result was that they admitted to making a $200m investment in a takeover play. The market immediately thought this was in Oxiana and OXR jumped (yesterday). But ZFX then told us they had started to sell the investment. OXR faded. With the sale of the smelter business they will have around $4bn to spend. OXR would cost $5.1bn plus a premium. Some brokers think they were buying a stake in a Canadian company and one suggests that they will have made $60m on the stake sale. ZFX down 3c to 1717c. OXR down 5c to 334c.
- There is talk that the ASX could buy the Nasdaq’s 31% stake in the London Stock Exchange – The ASX say there is not talk they intend to do so at the moment. Macquarie bid for the LSE last year. ASX down 20c to 4740c. Macquarie Bank down 2% or 159c to 7447c.
- Rams Home Loans down 8% today on results down 50% and comments about an “uncertain outlook”. There are concerns that the bad press over the last month will affect the core business and damage the brand. Down 8c to 108c. Their loan book decreased 37%. They have said that the recent events in the credit markets will materially impact on earnings. This set of results are in line with prospectus forecasts but were for a period pre the credit crunch. RHG down 8c to 108c.
- Lots of research around on Woolworths. Merrill Lynch the most bullish. They say Woolworths is the best company within their coverage operating in a “wonderful industry”. They have a $39 DCF valuation and say it is an “outstanding investment”. Price now 2852c up 33c.
Results tomorrow from Origin, Westfield Group, Amcor, Coates Hire and Cabcharge amongst others. Big stocks ex dividend tomorrow include: TAH, DOW, FXJ, STO.
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