The market is down 68, nearly double the 36 point fall the SFE Futures predicted.

WALL ST UP 9 – Wall St. moved a 147 point range and finished slightly higher after Ben Bernanke indicated the Fed was prepared to keep cutting interest rates to save the US economy from going into a recession. The Federal Reserve Chairman told lawmakers he was more concerned about a slowing economy than the risks of inflation and that the Fed will “act in the timely manner as needed to support growth and to provide adequate insurance against downside risks”. The Fed is expected to cut interest rates by 50bp when it meets on March 18. Fannie Mae and Freddie Mac were given a boost after the Office of Federal Housing Enterprise Oversight removed restrictions on their $1.5 trillion mortgage portfolios, allowing them to buy more mortgages. Fannie Mae recorded $3.22 billion in derivative losses thanks to a sharp rise in delinquencies. In economic news, the Commerce Department said new home sales fell last month (down 2.8%) for the third straight month, activity in the sector moving at its slowest pace in nearly 13 years, and that durable goods orders fell 5.3% in January, higher than economists had predicted. The NASDAQ put on 0.3% – Microsoft closed slightly down after it was fined a record $1.35bn by European Regulators for failing to comply with a 2004 antirust order.

Earnings results this morning…

  • Suncorp-Metway (SUN) IN LINE RESULTSGUIDANCE MUTED – Announced an 11% fall in NPAT to $468m. Macquarie Equities expected a profit of $467m, Were’s forecasted $431m. SUN down 1.2% to 5698c.
  • James Hardie Industries (JHX) – SLIGHTLY ABOVE EXPECTATIONS – SOLID BUT GUIDANCE LOWERED – Announced a 7% fall in 3Q profit – net operating profit (not incl. asbestos related costs) fell to $34.1m. Analysts had expected a net profit of $33.3m. JHX up 8c to 631c,
  • Origin Energy (ORG) GOOD – UPPED GUIDANCE – Announced a 44% increase in 1H profit to $334.7m, up from $233m. Underlying profit was down 3% to $200m. Org flying, up 8.5% to 857c.
  • Lend Lease Corp. (LLC) – ABOVE EXPECTATIONS – Profit up 49% to $259.6m from $174.7m last year. Analysts expected $240m on average. Declared an interim dividend of 43c. LLC up 10c to 1480c.
  • Perilya Results (PEM) – POOR – Made $12m against forecasts for $17m. Underlying interim loss of $1.2m. Zinc price down 28%. Production shortfalls. Dividend of 1c not impressive either. Negative operating cash flow. Cash of $112m helps. PEM down 1c to 174c.

In other news…

  • Lot of press about ABC Learning. Speculation about who could be interested in their business – the expectation is that it will involve an offer for the UK or US business. ABS still in trading halt. Directors squeezed by margin calls sold 24.9m between them at distressed prices in the last week and have 21m shares left. Looks like another 10m of those were sold yesterday at 210c. There is a story that hedge funds have bought the convertible notes ($600m of them) and are driving the price down to get a better conversion price (see The Australian).
  • NAB CEO John Stewart gave a talk yesterday. Main points: An increase in transparency and disclosure would boost confidence in financial markets, Sub-prime issues won’t turn into a global meltdown, the US will have a shallow recession and the Australian economy is going really well. NAB down 65c to 3068c.
  • Comments on the Westfield Group results from out analyst this morning – Operating profit up 11.5%. Earnings up 6%. A strong result. Company in very good shape with just 31% gearing, $8bn of undrawn borrowing facilities. Centro assets unlikely to be of interest (lower quality). WDC down 35c to 1770c.
  • United Group (UGL) announced it will supply 30 locomotives to WA’s Pilbara Iron, one of Rio Tinto’s groups. UGL say total revenue should be around $150m plus added revenue from maintenance and spare parts supply. UGL have been doing it tough lately, down 24% in the past month and down another 11c to 1270c.
  • Allco Finance Group put out a statement yesterday explaining their debt situation. You can read the whole thing here. They say they are in constructive discussions with their banks to seek approval for its plans to reduce debt. They hope to restructure the terms and conditions of its $900m senior debt facility. There was talk of an MBO/bid yesterday.

In the MARCUS TODAY newsletter today we have all the research post results the day before and continued coverage of the results season. Only two more days of results (Hooray). We also have an article which explains that portfolio investors have been getting it all wrong. It’s not diversification of investments that you need, it’s a diversification of investors. Let someone else save you from yourself and vice versa.


Peter Fray

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