The market is having another hard day today – down 82 after losing 83 yesterday. The SFE Futures suggested an 82 point fall in the market this morning. The ASX 200 IS BELOW ITS BLACK TUESDAY CLOSE. The ASX 200 is now down 25.1% from the year high. On Black Tuesday (Jan 22nd) it was down 24.3%. The Dow Jones is down 17.1%. The Banks down 36.3%. The retailers 38.5%.

WALL ST DOWN 153 – 7th fall on the trot and fell 3.04% on the week. Jobs numbers were disappointing – non-farm payrolls down 63,000 against forecasts of 25,000 – biggest jump in years – it has obviously fed fears of recession. Carlyle Capital Corp’s listed mortgage-bond fund has started selling its $21.7bn fund to meet margin calls and is considering “all available options” as it declares it is unable to meet margin calls from four banks and Thornburg Mortgage fell on news it has $610 million in margin calls that exceeds its liquidity. The Fed announced new measures to ease the credit crisis – they will increase the next two bond auctions from US$30bn to US$50bn and will begin US$100bn of repurchase transactions. Comments that the Fed action shows they have underestimated the credit crisis, are ineffective and will react by savagely cut rates again and again. Some are beginning to wander whether they have a magic wand or not, and if they do, whether it works. Bear Sterns fell 11% and led a financials fall of 3.1% on speculation that they were in financial difficulties – dismissed as “totally ridiculous” by the CEO. The FOMC meets on 18 March – there is a 2% chance of a 100bp interest rate cut, 74% chance of a 75bp cut and 100% chance of a 50bp cut.

  • Both BHP and RIO well down in ADR form overnight, 6.6% and 5.9% respectively. The new theme in the market is that resources are not immune from US recession. The Materials sector was down 3.3% and 3.7% in the last two days with brokers downgrading resources stocks. In an example of the new trend the A$ (a commodity currency) is now on the slide against the US$ despite the US dollar still falling against the Euro. If the resources stocks start following the financials then the Australian indices are in for an even tougher time. The foundation of the market is also perhaps its Achilles heel. BHP down 3.3%. RIO down 4.2%. Resources sector down 2.9% against a market down 1.5%.
  • Metals all down overnight – Both Nickel, Aluminium and Copper closed down 2.8% and Zinc fell 3.5%.
  • Oil price up $2.78 to $107.90 – According to Algerian state media, OPEC President Chakib Khelil said oil prices will stay at current high levels for the rest of the this year due to speculation and geopolitical tensions.
  • Gold down $2.40.
  • Bonds up with the 10 year yield down to 3.46% from 3.54%.

There is a bit going on today…a bit of M&A activity.

  • BID APPROACH – Challenger Financial Services (CGF) jumping yesterday on the news that a major shareholder has been pushed into selling on margin and been cleaned out (Cardiac Jolt sold 15m shares). Margin selling out of the way, short sellers covering. The price had fallen from 316c to 151c in a month. It is now flying on the news they have had an indicative non binding offer for Challenger Infrastructure Fund (CIF not CGF) at 350c from Consensus Business Group in the UK. CIF is 33% owned and managed by CGF. James Packer has 19.2% in CGF and was rumoured to be the buyer of CGF yesterday. CGF up 25c to 216c and CIF up 2c to 244c.
  • Incitec Pivot (IPL) has acquired Dyno Nobel (DXL) – the deal values DXL at $3.3bn or 280c a share and will involve its shareholders receiving 0.01406 IPL shares and 70c cash for each DXL share. Speculation of such a deal has been going on for a while. DXL board unanimously recommends its shareholders vote in favour of the deal. IPL is down 9% or 1371c to 13527c and DXL is up 19c to 253c.
  • Albidon (ALB) announces assay results from Zambia showing “significant uranium mineralization”. This is the company that placed stock to the Jinchuan Group in December above the market price. They have been rumoured as a possible takeover target for the combined Oxiana Zinifex company. ALB up 2c to 377c.
  • Talk that Westpac Banking Group (WBC) is showing interest in acquiring Suncorp Metway (SUN). A bit of an old one, Street Talk says they mentioned such a deal around 18 months ago. According to Bloomberg figures, WBC is trading at a big premium to Suncorp. SUN’s historical price-earnings multiple is 7.4x v WBC’s at 11.3x. If a deal did eventuate, it would most likely be script rather than cash. WBC down 19c to 2083c. SUN up 34c to 1211c.
  • Platinum Australia (PLA) down 7% on news they have ordered diesel generators to cover shortfalls in contracted electricity supply at its Smokey Hills platinum project in South Africa. PLA down 19c to 251c.
  • Credit Suisse upped their target price on Newcrest Mining (NCM) to 4500c from 3900c after increasing their copper price expectations. NCM down 2.7% to 3790c.
  • Consolidated Media down 12% since the takeover proposal fell through. Talk is that private equity firm SPO backed out of the deal with Lachlan Murdoch because of the Nine Network’s underperformance and high level of debt. Telstra say they are not interested in CMJ. CMJ down 4c to 376c.
  • Telstra is presenting in London and New York. They have a presentation published. After recent results there isn’t much in the way of new news. The presentation is called “Transforming Australian Telecoms”. TLS up 4c to 434c.
  • According to figures from the Supreme Court, repossessions in Victoria increased by 2,720 in the past year and have tripled in the past 4 years, NSW repossessions was up 1.6% to 5,454.

In the MARCUS TODAY newsletter today we have updated PEs and YIELDS on the ASX 200 and the daily email has a write-up on the new theme in the market which could take the indices to much lower levels.