The market has opened flat on the back of the Dow finishing 3 points up. The Dow was up 124 in the morning with “good news” on the financial front. But a broad based pull back in the afternoon saw the market dip to be down 26 at its lowest. Still, happy to see some consolidation after the Dow’s gain last week of 3.2% and a rise in the S&P of 7.8% off its March 10 low.

Financials in the US up 1% (best performing sector) on reports that Washington Mutual (up 29%) would receive a $5 billion injection from a private equity consortium comprising TPG, allaying fears of more write downs and further liquidity crises. Alcoa kicked off the results season with a shabby 4% fall on results down 54%. There have been $232 billion in credit loses related to subprime writedowns. 14 banks and security firms have required cash outside of investors over the past year, but securities firms are beginning to suggest the credit market is loosening up with Merrill Lynch research on the European bank sector upgrading recommendations and saying credit markets are “past their worst”.

Financials were dragging their feet in our market early on this morning but have recovered a bit perhaps on news that the RBA has taken $410m out of the banking system – a sign perhaps of easier credit market conditions. There is still $3bn in the system down from $6.8bn in January. Resources generally better – up small.

  • Both BHP and RIO up in ADR form overnight, 2.53% and 0.4% respectively. BHP showing strength in early trading, up 47c to 4102c. RIO up 99c to 13790c.
  • Metals mostly up overnight – Zinc up 2.1%, Copper up 0.7% and Aluminium 1.5%. Nickel down 0.6%. Zinifex down 2c to 1014c.
  • Oil price up $2.82 to $108.91 on speculation that OPEC will hold production steady this year. Woodside up 65c to 5690c.
  • Gold up $13.60 to $926.80. Newcrest down 29c to 3509c.
  • Bonds down with the 10 year yield up to 3.54% from 3.47%.

ANZ Banking Group revealed yesterday it had set aside $975m to cover bad debts for the 1H of the year, compared to its previous estimates of $567m for the FY. CEO Mike Smith said yesterday, the rapid increase in bad debt provisions has resulted from “the growth in the balance sheet, uncertainty around the market, and the likely knock-on effects of that”. The provision is described in the press this morning as “ahead of the curve” and preemptive. After the ANZ provision yesterday, Mike Smith the CEO said it was too early to call the low on the market and that it would take two quarters of clean results from the US banks without adverse news before you could declare it. ANZ up 29c to 2230c after a 6.6% fall yesterday.

Alcoa profit numbers in the US overnight saw the Alcoa share price fall 4%. Its not a great start to their results season and it’s a poor reflection on the prospects for our own resources stocks. The main issues were a falling US$, higher energy costs and lower metal prices. Alumina (AWC) noticeably weak against the sector this morning – down 3%. Rio Tinto’s (RIO) CEO Tom Albanese has again labeled BHP Billiton’s $135bn all-stock takeover as opportunistic and not good enough, in a speech in Canada. RIO up 99c to 13790c.

  • Australia ’s monthly business conditions fell 4 points to +7 index points in March. Lowest level since December 2002. NAB expects the cash rate to be at 6.0% by end 2009 from 7.25%.

  • Babcock & Brown (BNB) and ANZ Banking Group (ANZ) have announced they will participate in the recapitalization of Tricom Equities. B&B down 1c to 1369 and ANZ down 18c to 2183c.
  • Alumina (AWC) – Were’s say Alcoa’s result overnight has some key implications for AWC. Alcoa noted rising input costs (notably energy and currency), flat production (2Q likely to be similar to 1Q), and currency risk. AWC down 13c to 579c.
  • According to Dun & Bradstreet, the credit crunch is the biggest concern for executives and how it will impact of their businesses.
  • Albidon (ALB) announced last night that a massive and disseminated nickel sulphide mineralisation has been intersected in drilling at the Sunnyside prospect in Botswana. ALB down 11c to 359c.
  • Transurban (TCL) released their March Q traffic figures this morning – CityLink Revenue up 9.7% to $89.5m, Hills M2 revenue came in at $29.4m, up 3.8%. TCL down 5c to 659c.
  • Looks as if Fortescue Metals (FMG) Chairman Herb Elliot has lost around $20m – more than half of the value of his holding in FMG – as a result of Opes Prime collapsing.
  • Worley Parsons up 2% and Moly Mines up 17% on the news that the two have struck a deal to design an build a molybdenum project in the Pilbara. It is a $100m contract.
  • ABN AMRO has downgraded Boral to a SELL saying the 20% rally is overdone. BLD down 9c to 662c.
  • UBS Warburg downgrades Felix Resources (FLX) to NEUTRAL from BUY. FLX down 3%.
  • Gindalbie Metals up 8% on an announcement about a major expansion of the Karara Project. The stock hit 65.5c recently on the OPES collapse – the Malaysian royal family lost a 14.5% stake in the company.
  • Some anonymous clients of OPES have employed Mick Gatto’s company “Arbitrations and Mediations” to get them a “return”. Mick Gatto is flying off to Singapore today with the implication that money was being “stashed” overseas and that Mick is going to go and get it. “Sly of the Underworld” re-branded the OPES Prime situation on 3AW this morning…

In the MARCUS TODAY newsletter we have all the PE’s and YIELDS on the ASX 200 and a lot more of the stories and research and ideas doing the rounds. We have two additions to the Rumour File. One of our rumours came to fruition today – a profit upgrade from Webjet. Another is last weeks rumour that Western Areas will announce their Spotted Quoll resource next week – the stock is up 25% since.


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Peter Fray
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