The market is down 165 or 3% on the back Wall Street’s big fall on Friday. The SFE Futures suggested a 144 point fall in the market this morning.

WALL ST DOWN 315 – Wall St. moved in a 357 point range and finished the session 2.5% lower on the back of disappointing economic and earnings data. AIG down 6.6% after announcing a $5.29bn Qly loss largely thanks to losses on credit default swaps. The National Association of Purchasing Management in Chicago said its barometer fell to 44.5 last month – anything less than 50 means a contraction in the economy – down from 51.5 in January. The Commerce Department said consumer spending increased by 0.4% in January (bit better than expected). Fourth-quarter results have disappointed investors, profits at S&P 500 companies fell 23% on average in the 4Q. According to Bloomberg, analysts expect a 3% fall in profits for the next quarter (1Q) and 13.7% profit growth for the year, not even close to the 4.7% and 15.1% predicted only two months ago. All three major indexes finished the week lower; the Dow Jones lost 0.93%, the S&P 500 fell 1.66% and the NASDAQ dropped 2.58%. The big 2.5% fall on Friday sent the market in the red for February, the fourth straight month of decline.

UBS Warburg reckons combined write-downs for financial companies could total at least $600bn. So far we have heard about $181bn. Got a way to go.

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The big news today is Oxiana (OXR) bidding for Zinifex (ZFX) – Amazing that Oxiana would have flagged the possibility to the press so openly ahead of the approach. But they did. It is an agreed merger that delivers 50% of the combined group to each set of shareholders. Terms 3.1931 OXR for one ZFX. At the current price of OXR (397c) it values ZFX at 1267c. ZFX now 1113c. ZFX now trading at 1227c up 114c. Oxiana down 5c to 392c. For further comments on this bid see the newsletter. It is likely to be well received by the market. A combination of the two will be the third biggest diversified miner after BHP and RIO and the 4th biggest resource stock. Oxiana brings growth projects that need developing, Zinifex brings cash and zinc. They will be a Copper Zinc play with a bit of nickel. It is being seen as the formation of a second tier resources stock with a higher growth profile. If the market was in a better mood this deal would have sent both stocks higher.

A little quieter on the news front now the reporting season is over…but the action is in financials again. Banks getting smashed for the third day on the trot despite the fact 5 ANZ Directors have bought their own stock as has Ahmed Fahour at the NAB. A show of confidence in a sector down over 15% in the last month. Futile gesture so far.

  • JP Morgan cut their recommendation on Woodside Petroleum (WPL) to UNDERWEIGHT from NEUTRAL after the recent share price appreciation. WPL down 120c to 5580c.
  • Merrill Lynch maintains its OVERWEIGHT recommendation on Aussie Banks saying Westpac (WBC), St. George (SGB) and ANZ Banking Group (ANZ) are its top picks.
  • Allco Finance Group (AFG) announced this morning David Coe, Gordon Fell and David Turnbull have stepped down as executive directors. The board is now searching for an independent chairman. AFG down 24% to 66c.
  • Asciano Group (AIO) has announced 1H $71m loss. The stock has halved in value since listing at 1076c, last traded at 497c. Concerns grow over its huge debt levels. Revenue up 3.9% to $1.51bn and EBITDA came in at $365.9m. Declared interim distribution of 23c. AIO has hit a fresh 52 week low on the back of the news, down 6.4% to 465c.
  • BHP Billiton (BHP) has announced approval of the Douglas-Middelburg Optimisation Project, expected capital investment will be around US$975m. BHP down 78c to 3880c.
  • ABC Learning (ABS) CEO Eddie Groves was in US over the weekend for talks on asset sales. Potential buyers include Knowledge Learning and buyout firm Bain Capital Partners who recently paid US$1.3bn for Bright Horizons Family Solutions. ABS still in a trading halt. Last traded at 214c.
  • ChinaSteel Australia (CNH) made a sensational debut on Friday – the stock closed 50% higher than its issue price of 20c. CNH, which produces nickel pig iron for the domestic Chinese market, raised $3m in its float and now has a market cap. of $90m. CNH up 1c to 31c.
  • Goldman Sachs JB Were’s have cut their FY08 premium growth assumption on IAG Group (IAG) from 8.5% to 7.3% after IAG’s profit result. They also cut their FY08 margin estimate from 10.6% to 9.1%. Were’s maintain their HOLD recommendation and 377c target price. IAG down 11c to 366c.
  • The ACCC says it is “monitoring developments” at Western Australian Newspapers (WAN) but has not undertaken any “formal review” despite the media are suggesting they have. Seven Network’s Kerry Stokes is hoping to remove all WAN non-executive directors and wants a refreshed board. WAN down 16c to 1124c and SEV down 37c to 1098c.
  • Ramsay Healthcare (RHC) has announced the acquisition of BMI Nottingham hospital in the U.K. from General Healthcare Group for an undisclosed sum. RHC down 28c to 1101c.
  • Coffey International (COF) have also made an acquisition, it has acquired Canadian geotechnical firm Shaheen and Peaker and its subsidiaries for around $11m (Canadian). COF down 1c to 252c.
  • Australian manufacturing activity rebounding slightly last month – Ai Group/PricewaterhouseCoopers index came in at +2.2 points at 51.4 in February from January.
  • An Australian Industry Group study issued this morning suggests the Australian economy will struggle to grow at an average 3% a year for the next 10 years.

In the MARCUS TODAY newsletter today we have review on the results season, some comments on Oxiana’s bid for Zinifex and the PE’s and YIELDS on the ASX 200 including a list of the highest yields and cheapest PEs. For a FREE TRIAL OF THE MARCUS TODAY NEWSLETTER click here.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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