The market is having a strong day – up 64 – more than double the 42 point rise the SFE Futures predicted this morning. We were up 121 earlier in the session.

The Dow Jones was up 96 overnight – It moved in a 157 point range and finished higher for the second consecutive session on the back of better-than-expected durable goods orders and on expectations the Federal Reserve will cut interest rates tonight. Consumer sentiment fell less-than-expected. House prices in 20 US metropolitan areas fell for the eleventh straight month in November – down 7.7% — the biggest fall since the index was established back in 2000. The FOMC decides on interest rates tonight, the futures are suggesting a 76% chance that rates will be cut by 0.5% to 3%, down from odds of 86% yesterday. Yahoo! down 10% in after hours trade after results. Doesn’t exactly set a positive tone for tonight’s Wall St session. Dow Futures are currently down 4.

160 S&P 500 companies have reported results. 59% have been ahead of expectations, 14% in line and 28% below. Typically during a results season these ratios are 60%, 20% and 20%. So we are having a pretty normal season so far. Financial sector earnings are the big drag, down 104% on last year after some big individual write-offs. Earnings from the rest of the S&P 500 are up 11.3%.

Resources outperforming today – up 3.3% as a sector led by BHP up 148c or 4.2% to 3718c and RIO up 434c or 3.8% to 11799c. Metals all up overnight, Copper up 3.2%, Nickel up 2.7% and Zinc 3.8%. Aluminium up 5%. Zinifex up 39c to 1054c. Oil price up 67c to $91.66 on expectations the Federal Reserve will cut rates tomorrow. Woodside up 82c to 4667c. Gold down $2. Newcrest up 101c to 3476c.

In company related news…

  • Woolworths (WOW) has broken the habit of a lifetime and disappointed with its 2Q sales result this morning. Like-for-like sales on food and liquor division increased 6 against Goldman Sachs JBWeres and ABN AMRO forecasts expecting 8% growth. They upped their FY sales guidance slightly to 8-10% from 7-10%, but that is still below the 10.1% ABN had expected. WOW getting hit, down 2.3% to 3010c. Wesfarmers (who recently bought Coles) are up 51c to 3714c.
  • Lihir have announced 4th Q production numbers in line with expectations. 2007 production is in line with previous guidance but their 2008 guidance is disappointingly below their recent guidance and most forecasts. There will be production forecast downgrades from brokers. Tricom’s Hayden Bairstow has downgraded from BUY to HOLD. Price up 7c to 383c this morning but it is being left behind by the rally in the sector today.
  • Alesco (ALS) up 4% to 961c after announcing an expected 17% increase in 1H NPAT to $31.5m. Good result – Goldman Sachs JBWere expected a $31.9m profit. They tell investors to expect “significant” EPS growth in 2H and reaffirmed FY forecasts for EPS growth “at a slightly higher rate” than the 12.2% in FY07. ALS up 8.2% to 1004c.
  • Brambles (BXB) has appointed 3 new group presidents to help run its CHEP transport pallet business as part of their new structure designed to increase growth and enter new markets. BXB up 14c to 1034c.
  • Commander Communications (CDR) flying today – up 8.3% to 19.5c having hit 21.5c – they have released a turnaround plan that will result in the company selling non-core assets and cutting staff to 1,400 from 2,000. The bad news is that it has again cut earnings guidance for 2008 and has suspended dividend payments until the debt facility falls to $350m, but has managed to reach debt agreements with its lenders.
  • Orica (ORI) announced it has acquired Strata Control Systems, a provider of underground support systems to the mining industry for an undisclosed amount. ORI have already spent $1.6bn on acquisitions in the past 12 months. (Minova $857m and Excel $743m). ORI up 74c to 2977c.
  • Herald Resources (HER) announced this morning that Indonesia’s Antam Tbk and China’s Shenzhen Zhongjin Lingnan Nonfemet have made a 250c a share cash offer for them, valuing the company at $504.8m. HER’s board has unanimously recommended the offer and have withdrawn their support for a previous offer made by Calipso at 225c a share. HER had a huge day yesterday closing up 13%, now in a trading halt at 250c.
  • Emeco (EHL) getting smashed – down 24% to 71c – after telling the market its 1H profit will fall to around $30.5m, compared to the proforma profit of $34.8m a year ago. The downgrade is courtesy of its international division performing poorly. They stock is now way off its 190c IPO offer price. It follows a similar profit warnings last year from Bradken (BKN).EHL rent earth moving and heavy equipment.
  • Fosters Group (FGL) has appointed Angus McKay as CFO to replace Pete Scott who is retiring. FGL up 3c to 586c.
  • Morgan Stanley maintain their UNDERWEIGHT recommendation on Boral (BLD) despite lifting their profit forecasts for next year to $259m from $239m. They say, “Given BLD’s exposure to a continuing subdued Australian housing market, a weak US housing market, and an expected slowdown in US non-residential activity we continue to believe earnings risk remains firmly on the downside,” and have a 600c target price. BLD down 2c to 618c today. You might note that the US Housebuilding sector is up about 40% in the last week.
  • Comment from Soc Gen’s 31-year-old Rogue Trader – “I can’t believe that my superiors were not aware of the amounts I was committing, it is impossible to generate such profits with small positions”. He said it all started when he made an extraordinary profit out of positions in European markets when the London bombings occurred in 2005 and “It makes you want to continue, there’s a snowball effect”.

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Peter Fray

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