The market is down 68 pretty much on the lows of the day. Bank sector, property trusts and media sectors dragging us down. Resources generally up small. The SFE Futures suggested a 25 point fall in the market this morning.

Dow Jones closed down 49. Was up 45 at its highest and down 108 at its lowest. The main stories: UPS profit warning, financials finished lower on SEC filings by Goldman, Lehman and Morgan Stanley and the oil price hitting record levels. Mortgage and Bond insurers also closed down on credit rating downgrades. Citigroup down 0.76% on news it will sell $12 billion in leveraged loans and bonds to private equity firms. Lehmans down 7.17% and Goldman down 2.66% fell on SEC filings showing level 3 assets were up to $45 billion and $85 billion respectively. Level three assets are considered illiquid and complex to value and vulnerable to writedowns. The ex President of UBS says most major investment banks will have to cut staff by 35%. US oil inventories came in lower than expected last week, pushing the price up by $2.18 to a record $110.87 (hit $112.21) – transportation stocks down, Energy stocks up and Commodities jumped – biggest rise in two weeks – on the higher oil price but more importantly perhaps on higher agricultural commodity prices (rice, corn, wheat) amidst comments about lower global supplies, growing demand, and a falling USD (which means investors buy up commodities as a hedge against inflation). 26 commodities rose an average 2.7%. The Dow Futures suggested a 9 point drop at 11am tonight.

  • Both BHP and RIO slightly down in ADR form overnight, 0.87% and 0.07% respectively. BHP said this morning it was not aware of any plan by China to buy a stake in the company. BHP closed up nearly 4% yesterday on talk China’s Baosteel Iron and Steel, would buy a substantial stake. BHP up 9c today to 4200c. RIO up 12c to 13800c.
  • Metals all up overnight – Copper up 2.2%, Aluminium up 3.7% and Nickel 1.6%. Zinc up 1%. Zinifex up 9c to 1007c.
  • Oil price closed in record territory – up $2.35 or 2.1% to $110.89 – after the EIA said oil inventories fell by 3.2m barrels last week, analysts expected an increase of 2.4m barrels. Woodside up 159c to 5660c.
  • Gold up $19.50 to $937.50. Newcrest up 27c to 3422c, PNA up 2c to 102c. Credit Suisse have upped their target price on Pan Australian (PNA) to 130c from 113c. They retain an OUTPERFORM recommendation. They say the risk to the Laos project has reduced after a reserve upgrade yesterday.
  • US Bonds up with the 10 year yield down to 3.48% from 3.56%.

The main news today is the Victorian state government has announced that the licensing arrangements for wagering and slot machines for beyond 2012 will change, meaning Tabcorp Holdings (TAH) and Tattersall’s (TTS) duopoly over the state’ slot machine licenses will cease. TAH is likely to be hit the hardest as it derives 30% of its EBIT from Victorian licenses in poker machines and wagering. Hotel and clubs will bid directly for the slot machine licenses beyond 2012 and wagering will be kept as a single license and opened for tender after 2012 and neither Tattersall’s or Tabcorp is entitled to compensation. Currently both TTS and TAH hold licenses for wagering. Both TAH and TTS are in a trading halt. Aristocrat down 4.5% to 973c on the back of the announcement. Woolworths, as a venue owner, is seen as the beneficiary of the changes as they will doubtless acquire their own licences.

The other main issue if the fall in financials as some of the US financials reveal potentially bigger loan exposures. The US investment bank reporting season is next week. Their performance and the rhetoric is all important for our own bank sector which has had a shocker after a week after the ANX market update on Monday highlighting that most of the banks are probably cum some bad news on provisions and loan exposures.

  • Bank Of Queensland (BOQ) has announced a better-than-expected 1H cash profit of $65.3m but have lowered their guidance a touch to 10% earnings growth from 10-12%. They had run up ahead of results from $13 to $17.29. Now 1577c down 19c.
  • Indonesia is expected to give Oxiana a mining permit to develop a gold mine in Sumatra this month. Oxiana’s CEO Owen Hegarty says the company is looking for mergers and acquisitions and won’t be shy to consider opportunities outside its traditional markets such as Africa and Latin America. OXR unchanged at 333c.
  • Qantas Airways (QAN) has arranged to lease up to six Airbus A330 aircraft for Jetstar’s international routes to operate after a 6 month delay of Boeing Co.’s new 787 aircraft delivery. QAN down only 7c to 376 despite the oil price closing in record territory overnight.
  • Billabong (BBG) slightly down today after Zumiez, a small surf/skate retailer that sells Billabong products (representing 30% of BBG’s US sales) announced weak March sales numbers overnight. BBG down 25c to 1306c.
  • Sonic Healthcare’s (SHL) subsidiary, TDL, has been selected as the only bidder to proceed to the next stage of the largest NHS pathology tender to date. SHL up 24c to 1505c.
  • Macquarie Equities expects Orica to announce 1H operating profit of $238m, up 17% from last year and an interim dividend of 40c when it reports of April 28. Maintain their OUTPERFORM recommendation and 3412c target price. ORI down 31c to 2969c.
  • Australian employment in March has come in stronger than expected. +14,800 jobs were created, compared to an expected +10,000. Unemployment came in at 4.1%, as expected.
  • OPES receivers have claimed up to a dozen Ferraris and Maseratis from OPES related companies and clients.

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