All a bit of a headache heading into the Easter break – we are only open until 2.30 today but we’re making the most of the selling opportunity – seems prudent to be closing out any big bets ahead of the long weekend anyway – currently down 145 led by a dumping of the resources sector. Very disappointing day for recovery hopefuls who saw the market put on 200 points yesterday. Some of the bullish press articles are looking a bit out of place this morning. The Futures suggested a 100 point fall in the market this morning.

The Dow Jones closed down 293 (2.4%). It was down 298 at its worst and up 69 at its best. Very disappointing night for recovery hopefuls. Wall St simply couldn’t hold on to the 416 point gain the night before although this time the problem was commodities rather than financials. The main issue overnight is that post the Fed meeting the conclusion is that the rate of interest rate cuts will slow (it will have to with interest rates at 2.25%). On the back of that the US dollar has had a big rally and bonds a huge rally with the three month T-Bill yield at its lowest 50 years. A strong US dollar means lower commodity prices in US$ terms and on the back of that commodities had a terrible night. Financials only lost 2% of their 8.5% gain the day before and Morgan Stanley continued the run of good investment bank results and closed up 1.4%.

There are a few unfortunate press articles this morning enthusing about the “The recovery” yesterday – in light of the overnight falls they are not worth the reading. Looks like any enthusiasm for yesterday’s rally on Wall St has been misplaced (yet again) although there is one difference this morning, the fear over financials has been replaced by a fear for the resources. Gold and oil peaked.

  • Both BHP and RIO well down in ADR form overnight, 6.8% and 8% respectively. Both are getting thumped today. BHP down 7.2% to 3433c and RIO down 784c or 6.2% to 11820c.
  • Metals all down overnight – Copper down 3%, Zinc down 4.6% and Nickel 4.6%. Aluminium down 2.6%. Zinifex down 7% to 939c.
  • Oil price had its biggest one day fall since 1991 down $4.94 to settle at $104.48 after the Energy Information Administration said overall consumption of oil and its products fell by 3.2% over the last month compared to the same time last year. EIA data also showed oil inventories increased by 200,000 barrels last week, much lower than the 2m barrels analysts had predicted. WPL down 5.7% to 5185c.
  • Gold down a big 6.2% or $59 to $945.30. Biggest fall ever (previous biggest was $50 in 1980). Gold stocks underperforming as a result. NCM down 13.5% (!) to 3115c and Sino Gold Mining down 13.6% to 670c. Someone must think the gold price has peaked.

In the news today… a bit of corporate activity.

  • Lihir Gold (LGL) and Equigold (EQI) to merge – LGL has made a $1.1bn takeover offer this morning for Equigold. EQI shareholders will receive 33 LGL shares for every 25 Equigold shares they own. Offer values the company at 533c a share or $1.1bn. Lihir Gold down 10.6%, EQI up 38c to 468c.
  • Transpacific Industries Group (TPI) have made an all shares-based bid for DoloMatrix International (DMX) valuing the company at $41m. TPI down 5% to 839c and DMX up 7c or 31% to 29c.
  • Indophil Resources (IRN) made a 100% off-market all scrip 165c a share bid for Lion Selection (LST). IRN say if the offer in declared unconditional, they will up their offer to 178c a share. IRN down 3c to 64c and LST up 15c to 150c.
  • Traffic at Macquarie Airports’ (MAP) portfolio of four global airports in February was up 13.1% from last year. MAP down 1c to 317c.
  • Westpac (WBC) announces pretax gain of around $270m after Visa listed on the NYSE overnight. WBC down 10c to 2390c.
  • Both CBH Resources (CBH) and Perilya (PEM) are in a trading halt and will remain so until Wednesday 26th March. Talk of a merger. CBH last traded at 35c, PEM at 100c.
  • Origin Energy (ORG) has raised $1.54bn, including oversubscriptions of $420m, from the syndication of its underwritten 2-year credit facility. ORG down 37c to 853c.
  • Vanguard Investments Australia is buying into Australian property trusts. They became a substantial shareholder in Centro Property Group (CNP), GPT Group (GPT) and Valad Property Group (VPG). CNP down 2c to 28c, GPT Group down 10c to 290c and VPG down 4c to 80c.
  • Flexigroup (FXL) has implemented a dividend reinvestment plan for its interim dividend. FXL down 3c to 57c.
  • Goldman Sachs JB Were have upped their Bank sector recommendation from UNDERWEIGHT to OVERWEIGHT saying current prices imply earnings growth of 1.1% to 3.8% for the next 10 years compared to the long term average of 5-6%. Banks outperforming today – CBA down 1.6%, NAB down 2.2%, WBC down 0.5% and ANZ up 1.2%.
  • Woolworths goes ex dividend today (44c). WOW down 66c to 2837c.

Dow Futures suggest a 40 point fall at 12 noon.

In the MARCUS TODAY newsletter today we have all the usual PEs and YIELDS on the ASX 200 and answers to a few “Stupid Questions” including “How long does a bear market last”.


Peter Fray

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