The market is down 32 despite Wall Street having a strong session overnight. The SFE Futures did predict a 2 point fall in the market this morning.
The Dow Jones closed 215 – It moved in a 247 point range and closed well up helped by a recovery in financial stocks and after some better-than-expected earnings results. The big news overnight was Abu Dhabi Investment Authority saying it would invest $7.5bn in Citigroup Inc., a vote of confidence for the bank that has been decimated by the credit crunch and has lost 47% of its market capitalization this year. Citigroup’s ability to secure assistance provided the market with a boost, particularly the financial sector, and has raised hopes that other companies hit hard by the credit crunch will be able to do the same – the sector made up half of the previous sessions losses putting on 2% – JP Morgan put on 3.5% and Bank of America closed up 4%. In other news, Staples Inc. closed up 10% after announcing a better-than-expected 5% fall in 3Q profit, and Activist Inc. finished 11.7% higher after it announced strong Thanksgiving weekend sales and upped its 3rd Q and FY profit and sales forecasts. Intel Corp. also had a strong session after JP Morgan lifted its earnings forecasts for next year. The NASDAQ put on 1.5%.
The rather weak response to Wall St comes perhaps from late news that Freddie Mac has halved its dividend and raised $6bn in preference shares in anticipation of further credit market losses. Resources also weak on weak metal prices. The bottom of the bull market trading range on the ASX 200 implies 5935 which is 7.7% down from here.
Resources struggling today…BHP down 35c to 4160c and RIO up 47c to 13622c. The German Steel Federation has asked Brussels (the EU) to block the BHP-RIO merger saying “This merger between the iron ore market’s world number two and three would further raise the pressure on iron ore prices. It would limit the steel industry’s access to the raw materia”l. On the newswires – BHP has arranged a $70bn loan from 7 banks to be used to take over RIO. On that basis you might expect a formal bid to come sometime soon. RIO will bounce when it does. BHP have had their AGM this morning in Adelaide and there is no new development on the RIO bid front. They say they expect commodity pries to remain high in the long term but volatile in the near future. RIO yesterday talked about commodity prices staying strong, not for a decade but decades.
Metals all down overnight, Copper down 2.2%, Nickel down 0.5% and Zinc down 0.2%. Aluminium down 0.1%. Zinifex down 11c to 1426c. Merrill Lynch has cut Zinifex’s (ZFX) earnings forecasts for FY08 by 8.8% on the back of foreign exchange movements and lower metal price forecasts and in anticipation of disappointing demand for zinc. They’re not a fan of the stock, they maintained their SELL recommendation and say “We believe the zinc price is entering a period of weakness.”
Gold price down a touch – HSBC upped their 2008 average gold price forecast to $720 overnight.
- Wesfarmers had their investor briefing yesterday – the main topic of discussion was how they planned to turn the Coles Group business around. Goyder said it would take time. Brokers have mixed responses this morning. The bulls say they have a successful retail model already in place and although in will take time, WES has the ability to make it work. UBS Warburg upped their target price to 4530c and maintained their NEUTRAL recommendation saying WES will turn Coles around but it will “take WES 3-5 years”. Merrill Lynch on the other hand maintained their SELL recommendation and say that anyone who thinks there are any “magic wands” to improve the business is likely to be disappointed. They went as far as saying, “We would not be surprised if the earnings for Coles actually went backwards (and materially) in the first couple of years.” WES down 25c to 4250c after having a good couple of days.
- JB Hi-Fi has signed an exclusive supple agreement with local VOIP provider Freshtel Holdings (FRE) to sell their FRE’s internet phone products throughout Australia. FRE up 5% to 36.5c.
- MFS Ltd. (MFS) announced it will retain 100% of its travel services and hospitality business Stella Group. They had previously planned on letting private equity invest into the business but have since changed their minds. MFS up 5c to 447c.
- There is press this morning saying a bid for Brambles is less likely as the Asciano (AIO) share price hit a new all time low making a bid more difficult. Asciano is 35% off its June peak. Toll is also talking about bidding for a smaller pallet group Loscam instead of Brambles. AIO has a 4.09% stake in BXB. AIO have an investor briefing on 11 December. None of it sounds terribly positive for AIO – what is a company that only listed in June having a strategic review for? AIO down 12c to 748c, BSB down 16c to 1220c.
- Deutsche Bank say BUY Boom Logistics despite an earnings downgrade. They have dropped their target price from $4 to $3 and talk about strong competition and weak demand. BOL down 12c to 218c.
- JP Morgan says Nufarm (NUF) stands to benefit from the NSW and Victorian Governments announcement to allow 4-year moratorium on genetically modified canola to expire in 2009. They have the view that if one state removed the moratoria, the others will soon follow providing “some incremental” upside to NUF Australian earnings. NUF up 1c to 1666c.
- Qantas had admitted to fixing air cargo prices and will get fined $61m from the US Department of Justice. They become the third airline to plead guilty, British Airways and Korean Air each agreed to pay $300m back in August for there roles. QAN has had a solid year, up 23%. QAN down 2c to 588c.
- Credit Suisse cut their recommendation on Sigma Pharmaceuticals (SIP) to Underperform from Neutral due to recent share price appreciation. They attended the company’s market briefing yesterday and acknowledged the company is starting to turn it around by upping their target price to 166c from 151c. SIP down 3c to 165c.
- Macquarie has a NEUTRAL recommendation on Telstra (TLS) this morning with a 481c valuation. Now 467c down 5c today.
- Valad Property Group (VPG) announced it has acquired a number of residential and industrial properties in the Asia Pacific region. They have now bought four established self storage sites for around NZ$24.3m through their JV with Kennands. VPG has been hit hard recently, down 13% in the past month. It is unchanged today at 164.5c.
- WebJet have published their AGM presentation today. First quarter on track. Price up 1%.
- Companies going ex-dividend today include James Hardie (JHX) 11.67c and Old Fields (OLH) 4c.
I have an article in the MARCUS TODAY newsletter today looking at “Happiness” and how to achieve it. George Burns thought he had it – “Happiness is having a large, loving, caring, close-knit family in another city”.
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