The market is down 80. The SFE Futures suggested a 41 point fall in the market this morning.

Dow Jones closed down 120. Two days of 100+ point falls have followed a two day 448 point rise. It was down 128 points at its low and up 54 at its best. The main issue a weak GDP number (but in line with expectations) and financial weakness. Final GDP for Q4 07 +0.6% after 4.9% growth in the previous quarter. Financials down 2.0% on rumours about Lehman Brothers’ solvency, the fourth largest US investment bank. Lehman fell 8.9% on concerns they were going to make an announcement suggesting they were having a similar “run on the bank” to Bear Stearns. The company said “There are a lot of rumors in the marketplace that are totally unfounded. We are suspicious that the rumors are being promulgated by short sellers of our stock that have an economic self interest”. After Fed action in the financial markets the Lehman Bros CEO recently said “from my perspective, takes the liquidity issue for the entire industry off the table”. Investors fleeing Schwab Bond Fund which ranked bottom of its category, having been over-exposed to corporate and non-agency mortgage bonds. Metals had a good night.

  • Both BHP and RIO down in ADR form overnight, 0.15% and 0.20% respectively. BHP down 63c to 4080c.
  • Metals all up – Copper up 3.8%, Nickel up 5.1% and Zinc 3.1%. Aluminium up 2.8%. Zinifex down 8c to 991c.
  • Oil price up $1.73 to $107.56 after an Iraqi oil pipeline was bombed. The newswires said exports from southern Iraqi terminals have been cut to 1.2m barrels a day compared to the usual 1.56m as a result. Woodside down 4c to 5343c.
  • Gold down 40c to $948.80. Newcrest up 75c to 3410c.
  • US Bonds down with the 10 year yield up to 3.55% from 3.46%.

The main issue this morning is the receivership of margin lender OPES prime (backed by the ANZ). The main points are:

  • Fear that ANZ may have to take a write down – they say they won’t.
  • It lends credence to the financial fear in the market – you just do not know where the next disaster is about to pop up.
  • It is expected to lead to the OPES margin book being unwound which includes clients selling a host of positions across the market. Not sure how big their book is yet but it is unlikely to be a market moving sell down, a few billion perhaps, absorbed fairly easily. The concern is for some of the smaller stocks that OPES have been known to allow lending on outside normal parameters for illiquid stocks.

Struggling to find something to mention this morning. Nothing of impact in the announcements.

  • ANZ Banking Group (ANZ) doesn’t expect a material loss from its exposure to Opes Prime Group which has been put into receivership. ANZ down 93c to 2292c.
    Babcock & Brown
    slightly down – 6c to 1415c – on a muted reaction to their capital raising yesterday. ABN AMRO have cut from BUY to HOLD. Other brokers more supportive although earnings and target prices have been adjusted for the dilution from the share issue.
  • RIO’s CEO Tom Albanese has reiterated BHP’s takeover offer undervalues the company and warned that mining companies are running the risk from becoming too big. RIO down 115c to 11975c.
  • Credit Corp Group (CCP) has updated the market with its strategic review – it is seeking expressions of interest for the sale of two of its businesses, Process Serving and Mercantile Collection businesses. CCP up 18% to 95c.
  • Allied Gold (ALD) has signed a letter of intent with Barrick Gold. ALD up 3.5c to 78.5c.
  • MFS (MFS) shareholders have approved a change in the company’s name to Octaviar Ltd. MFS still in a trading halt. Last traded at 99c.
  • Origin Energy (ORG) – Kupe JV announced plans to undertake exploration drilling of the Momoho project. ORG down 2c to 901c.
  • Redflex (RDF) has received a new photo enforcement contract with the City of Austin in Texas. RDF up 1c to 315c.
  • Pharmaxis (PXS) has announced its Aridol has been included as an approved test by the International Olympic Committee’s Medical Commission. PXS up 1c to 228c.
  • Lachlan Murdoch still battling to find another equity backer for his $3.3 billion joint bid for Consolidated Media. CMJ down 4c to 369c.
  • Ten Network not doing much this morning on the broker reaction to their results yesterday. Citigroup cuts their target price from 259c to 208c. TEN down 2c to 218c.
  • UBS Warburg have upped their Alumina recommendation to BUY. AWC up 8c to 554c.

In the MARCUS TODAY newsletter today we have an article called “Bollocks” – one way to view the “Warren Buffett Way”. We also have the PE’s and YIELDS on the ASX 200 and a lot more of the stories and research and ideas doing the rounds.


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