The market is having another terrible day – down 97 – we were down 158 early on. The SFE Futures suggested an 84 point fall in the market this morning.

The Dow Jones closed down 172 overnight – Wall St. moved in a 181 point range and finished lower for the second consecutive session on the back of disappointing economic data and comments made by former Federal Reserve Chairman Alan Greenspan. In a speech on Sunday night, Greenspan said “stagflation” – (when inflation increases and the economy stagnates) – is a big possibility after the Fed cut interest rates last week and the CPI came in higher then expected (he really wishes he was running the Fed obviously… and is irritatingly throwing a shadow over Bernanke). In economic news, The New York Fed’s Empire State Manufacturing Index fell more than expected in December, the National Association of Home Builders housing market index was unchanged last month – its lowest level since it started the index in 1985 – and the Commerce Department reported an improvement in the US current account deficit to $178.5bn in the 3rd Q. There was plenty of takeover activity overnight despite Wall Street struggling. Trane Inc. closed up 22% after Ingersoll-Rand Co. announced it would buy the company for $10.1bn, National Oilwell Varco Inc. (down 9.2%) said it would acquire Grant Prideco Inc., (up 13%) a Houston based oil drilling equipment maker for $7.37bn, and Aon Corp. said it will sell two insurance units for $2.75bn in separate deals. The NASDAQ closed down a big 2.3% – both eBay and Amazon got sold down on concerns online holiday sales growth is slowing.

Resources underperforming… BHP down 69c to 3966c and RIO down 315c to 12870c. Metals all down overnight, Nickel down 3.1%, Copper down 2.6% and Zinc 1.1%. Aluminium down 0.2%. Zinifex has hit a 52 week low, down 5.4% or 70c to 1239c. Oil price down 62c to $90.69 on concerns the US economy will continue to struggle and demand will fall. Woodside down 81c to 4614c. Gold up $1.30. Newcrest down 5% or 169c to 2998c.

In total, 10.7% was wiped off the property sector or $13.495bn yesterday. The sector has a market cap of $112.166 billion. The ALL ORDS has a market capitalization of $1,490.458 billion. So this sector is 7.52% of the market now. It was 8.4% before yesterday.

The issue is not the property trust sector it is companies that have high gearing and short term borrowings that need refinancing. This does not include the whole property trust sector and notably Merrill Lynch tell us to buy GMG and VPG in the sector this morning after the falls. The problem of course is which companies have a problem. No one really knows so the reaction is sell first and ask questions later. This morning and yesterday we have seen the usual sell down in the financial engineers, MQG, BNB, AFG and CGF. Banks aren’t exactly performing either with St George Bank the worst today down 2.5%.

The selling has spread to anything that is risky… everyone is going risk averse, shutting up shop for Christmas closing down anything that could upset the Festive Season and that means selling all those small illiquid trades (a lot of which are in unrelated stocks like the resources) no matter the lack of liquidity or the damage to the share price. Even cash rich companies like Sally Malay have been belted early and are now being bought. Noticeably SMY are now 16% up from their days’ low. Centro itself is 85% up from the day’s low. This is money being justifiably made out of fear. BHP is under $40. RIO under $130. Fortescue Metals under $60.

Keep your hair on… hard when you’re screaming at 200 miles and hour with your hair on fire.

  • Centro Properties (CNP) is dominating the headlines (RAMS II) – CNP provided an earnings and refinancing update yesterday. Due to increased costs associated with the debt markets and costs of refinancing, they reduced their FY08 distributable EPS to 40.6c per security and will not pay a distribution for the period ending 31 December. Macquarie Equities have cut both Centro Properties (CNP) and Centro Retail (CER) to UNDERPERFORM on uncertainty surrounding its debt refinancing. They believe CNP may have to sell assets at a loss to raise cash and pay down debt. After losing 76% of its market cap yesterday, CNP is down another 51% to 70c. They hit 42c at their low. CER down 37% to 54c. They are having a near death experience which they will survive if they manage a few asset sales and an equioty raising… got to love the equity raising concept in this situation… “The banks won’t lend us money, but will you?”. Good luck pal.
  • ANZ Banking Group (ANZ) has had its AGM this morning – CEO Michael Smith told shareholders he aims to double the banks profit in 5 years and that he expects 20% earnings growth to come from Asia by 2012. (Currently, Asia accounts for around 7% of the banks net profit, while New Zealand accounts for 20% and Australia 69%) Organic growth preferred to growth through acquisitions and has plans to double the investment and insurance profit and increase customers by as much as 50%. Hasn’t had the best of years, down 6.3% in the past 12 months. ANZ down 29c today to 2666c.
  • Merrill Lynch say the sell off in Goodman Group (GMG) yesterday was “un-deserved” and they have upgraded from NEUTRAL to BUY. It is down 32% in three days. They note its gearing is 46% versus Centro at 70% and say “Additionally, last week GMG refinanced A$835 million of debt for five years at a reasonable locked-in margin showing that banks are comfortable providing it with liquidity”. They have also upgraded Valad Property (VPG) to BUY from NEUTRAL with a 170c target price. Now 125c.
  • Fortescue Metals (FMG) down 6.6% to 5801c – According to the Financial Review , it is looking to establish partnerships with Chinese shipping companies to assist them in exporting their iron ore more efficiently. FMG down 339c to 5870c.
  • Gold explorer Emmerson Resources (ERM) made an impressive debut yesterday closing 15% above its IPO price at 23c. ERM raised $20m to hunt for gold at its projects in the Tennant Creek region. ERM down 0.5c to 22.5c.
  • Babcock & Brown Infrastructure Group (BBI) down 4.5% to 150c – it has completed its debt pricing for its National Gas Pipeline Company acquisition. Were’s maintain their HOLD recommendation and 167c target price.
  • ABC Learning Centres (ABS) outperforming today – up 10c or 2% to 500c after announcing it has finalized a 3 year $1.43bn multi-currency loan with several domestic and international banks. The debt will used to refinance their current working capital facilities that mature in 2008. ABS has had a year to forget – down 41% in the past 12 months.
  • Murchison Metals (MMX) have extended their bid for Midwest Corp (MIS) to the 23 January. MMX down 14c to 318c.
  • Credit Suisse upped their recommendation in Brambles (BXB) to OUTPERFORM from NEUTRAL due to recent share price falls. They say the stock is down 3.1% since November 21 against a 1.9% rise in the ASX 200. They maintain their 1445c target price. BXB down 19c to 1159c.
  • Flight Centre (FLT) has been cut to HOLD from BUY by ABN AMRO despite increasing their target price to 3328c from 2881c. They have also upped their pre-tax profit forecasts by 9% in FY08 and 13% in FY09 and continue to believe the earnings upgrade by management remains conservative. FLT down 77c to 2993c.
  • According to the AFR, Beyond International (BYI) might get a better takeover offer after Destra (DES) bought a 10% blocking stake at around 133c. They are being bid for by Mariner Financial. DES was placed in a trading halt yesterday and has the backing of shareholder Prime (PRT) to help fund the approach. DES last traded at 27c.
  • MPG and RRA go ex-dividend on the 20th of December, 2c and 1.78c respectively.

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