The market is up 35. The SFE Futures suggested a 75 point rise in the market this morning.

The Dow Jones closed up 180 overnight – It moved in a 196 point range and finished higher for the second consecutive session on the back strong gains from consumer stocks and growing confidence that the Federal Reserve will cut interest rates when they meet on September 18. Speaking to Germany’s Bundesbank in Berlin, Bernanke didn’t raise the topics of interest rates or the economic outlook but instead talked about the need for countries around the world to work together towards achieving economic stability. According to the federal fund futures, an interest rate cut is a foregone conclusion, contracts show a 72% chance the central bank will cut rates by half a percent, up from 54% last week and down from 76% yesterday. Coca-Cola and Pepsi both closed up after Goldman Sachs upped their recommendation on the sector saying the earnings outlook for 2008 looks strong, and McDonald’s put on 3.2% after a stronger-than-expected performance in August. The NASDAQ had a good session, it closed up 1.5% helped by ImClone Systems Inc (up 18.4%), which along with Bristol-Myers Squibb said the drug Erbitux improved the survival rate of lung cancer patients in a study.

Resources doing well today…BHP up 90c to 3933c and RIO up 98c to 9905c, they will provide Ivanhoe Mines with a $350m credit facility to help fund the development of its mine project in Mongolia. Metals all up overnight, Copper up 4.2%, Zinc up 2% and Aluminium 1.4%. Nickel up 1%. Zinifex up 31c to 1601c. Oil price up 63c to $78.16 after OPEC agreed to lift crude output. Woodside up 30c to 4630c. Gold up another $8.80. Oxiana up 13c to 344c.

  • There is a lot of positive research out on Newcrest (NCM) this morning after they announced yesterday they will they are going to raise $2.04bn through an Accelerated Renounceable Entitlement Offer (AREO) to get rid of their ugly hedge book, which has always been a very unattractive part of the Newcrest investment case. Macquarie describe it as a “Financial platform for the future”. They retain a NEUTRAL recommendation and a $25 target price. They say the catalysts for the stock are consistent production from Telfer and M&A activity in the sector. They say the deal is 3% accretive to earnings in 08 and 16% in 09. Deutsche Bank has a HOLD recommendation and have increased their target price to 2660c. They say “overall positive”. Merrill Lynch has a BUY recommendation. Earnings forecasts are down 2% in 2008 but up 24% and 43% in 2009 and 2010. They say they have a positive view on gold and that the offer is attractive (the renounceable share issue is 7 for 20 at 1740c – for a TEX price of 2288c – 7.7% below the current share price). Last 2480c. NCM in a trading halt for the rest of this week.
  • Just Group (JST) up 6c to 476c after announcing a 28% increase in FY07 profit to $61.4m, excluding the gain achieved from the sale of their shares in Colorado Group. NPAT including the Colorado sales was $63.9m, slightly above analyst’s expectations. Good set of results, the stock is up 27% in the last 12 months.
  • Brambles (BXB) have appointed a new CFO – the previous CFO, Michael Ihlein was appointed CEO – the new CFO, Elizabeth Doherty, is from Tesco in the UK – the story that Toll Holdings want to bid for them is still fresh with the stock up over 3% yesterday on comments from Toll’s CEO Paul Little that they would like to have talks about a tie up with the pallet business. BXB up 2c to 1382c.
  • CSR Ltd (CSR) have made their second glass related acquisition in less than 3 months. They announced this morning they have bought Don Mathieson & Staff Glass for A$175 million, the deal will be partly funded through a capital raising, hence today’s trading halt. The company announced in June the acquisition of glass manufacturer Pilkington Australasia for $690m. They are doing a $150m placement to institutions and a $75m share purchase plan for shareholders. CSR last traded at 318c.
  • China sold off about 5% yesterday – not that we take much notice but worth keeping an eye on it – reasons include Government IPOs and talk of higher interest rates.
  • The Reserve Bank of NZ meet but are expected to leave interest rates unchanged.
  • Companies going ex dividend today include – CEU, FLK, MFS, NPH, PGF and SUL.

In today’s edition of MARCUS TODAY we have the ‘Idiot’s Guide to building an Australian Equity Portfolio – Step 9’ which includes our next 5 picks making 13 in all. We’ll finish our core portfolio next week. 7 stocks left to pick.

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

Peter Fray

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