The market is a down 23 – The SFE Futures suggest an 18 point rise in the market this morning.

We are taking a bit of a breather today after closing in record territory yesterday. Resources underperforming. They flew yesterday, the nickel sector in particular, on the back of Xstrata bidding for Jubilee Mines (JBM). Sally Mallay (SMY) is still going strong this morning, up another 36c or 6.5% to 587c (they have had some drill results as well – fuelling the fire). The market must be thinking it is next in line. Energy stocks floppy today despite the oil price closing in record territory, and gold stocks down despite the gold price hitting a 23 year high.

The Dow Jones closed up 63.5 – It moved in a 96 point range ahead of key economic data and the Federal Reserve’s announcement on interest rates. The Fed begins its two day meeting tomorrow (tonight). Most economists are expecting interest rates to be cut by 25bp to 4.5% although a few think rates might even be reduced by half-a-percent. The next FOMC meeting is on 11 December. If they don’t cut rates or make statements suggesting this is the last of the interest rate cuts then the market is expected to react badly.

Resources slightly lower today…BHP down 5c to 4725c and RIO down 70c to 11189c. Metals mostly down overnight, Nickel down 0.6%, Aluminium down 1.5% and Copper down 0.3%. Zinc up 0.2%. Zinifex does ex dividend 70 cents today and is down 93c to 1766c. Oil price up $1.72 to $93.45 after Mexico shut a fifth of its production and the US$ fell to a record low. Woodside down 5c to 5516c. Gold up $5.10. Newcrest down 29c to 3177c.

Lots of production numbers out today.

  • Lihir have put out their 3Q production numbers – not great – production has been affected by industrial action and delays on commissioning plant – they have downgraded 2007 production guidance – from 800-830,000oz to 750,000 oz. Disappointing for a stock up from 280c to 440c in a couple of months. We are likely to see some consensus downgrades in the research tomorrow if not today. LGL down 4.5% to 422c.
  • The Coles independent experts have updated their recommendation in light of the rise in the Wesfarmers share price (up from $39 to $44) – they now tell us that the bid is worth $16.03 to $16.56 (not including the WES dividend). Coles now 1615c…up from a low of 1337c two month ago. WES is on a PE of 21x and a 4.1% yield. Not looking cheap but then the forecasts are probably conservative on the chances of a Coles turnaround and that will be the share price driver over the next year. WES down 14c to 4390c and CGJ is unchanged at 1614c.
  • Oxiana (OXR) have announced a 30% rise in the Prominent Hill budget to A$1.08bn – a “Budget blow-out”. Still on track for 3rd Q production in 2008. The increase was sort of expected. There are some positive comments in the announcement about expecting to make $700m in the first year of production. No reason to chuck it out with the bath water – in fact most people will be looking for a buying opportunity. The stock was up 4% yesterday. Down just 3c today to 408c.
  • Tabcorp (TAH) down today – 12c to 1500c – on talk the government will announce plans for a second casino in NSW. Publishing & Broadcasting (PBL) appears to be the frontrunner. Were’s say despite TAH and Tattersalls (TTS) falling 8% and 12% respectively in the past Q, neither offer a compelling buying opportunity. They say TAH’s management’s expectation of a 2 year turnaround won’t do any good for the share price in the short term and they’re worth a closer look at around the 1500c level. As for TTS, it has “less structural risk” in the longer term which is reflected in its FY08 PER of 20x.
  • Lot of press about the A$ going to parity against the US$ with interest rates falling in the US and stable to rising in Australia and with the commodities boom favouring a higher A$ against almost all currencies.
  • Companies staging their AGM’s today include: APA, ASX, CHR, EMB, FPG, GLF, SSC and UCW.
  • Companies going ex-dividend today – CVC, IPE, TWT and ZFX.

We have some comments on Boral (a sleeper) in the MARCUS TODAY newsletter today along with an article about running a “ONE STOCK PORTFOLIO” – a comment on diversification made by many – why diversify if you know what you are doing. The truth about the one stock portfolio idea is that it is probably less risky than a diversified portfolio….because you have your “head in the game”.

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