The market has the started the week off with a bang – up 140, nearly double the 79 point gain the SFE Futures had predicted this morning. This comes on the back of the 228 point rise on Wall Street on Friday on the back of a string of positive 1Q earnings results. Financials leading the way up 3.6% with most of the banks up nearly 5% – a brave rally ahead of the results season starting with ANZ results on Thursday.

Dow up 228 or 1.81%. Up all session and up 273 at its highest. It was a good sessions all round, Tech stocks up 3.4%led higher by Google’s after hours stunning 1Q results. Google up 20%, Financials up 1.8% as market interpreted the $5.1bn in losses from Citigroup as more reasonable than feared and Industrials lifted by Honeywell and Caterpillar posting better than expected 1Q results. The Dow up three consecutive days and up 4.3% for the week. The S&P had its biggest week for 2007 and the Nasdaq its best weekly performance since August 2006. The market is extracting confidence from the likes of Google’s, Intel’s and IBM’s earnings results which have defied fears about a slowing economy and a downturn in consumer spending. Caterpillar, Coca-Cola and WW Grainger beat consensus estimates last week. Some economists are predicting that 1Q earnings will be down circa 14%, but only 6% outside financials – a picture that is certainly less dire than first feared when viewed ex financials. No economic news of note.

  • BHP up 0.47% in ADR form on Friday, RIO hardly changed down 0.01%. BHP up 128c to 4370c and RIO up 2.3% to 14310c.
  • Metals mostly down – Zinc and Nickel down 1.5%, Copper down 0.5% and Aluminium up 0.5%. Zinifex up 7c to 1031c.
  • Oil price up $1.76 to $116.56 – After OPEC Secretary-General Abdullah el al-Badri said oil prices would likely go higher and that the group would raise production if the price pressure was due to a shortage of supply. Woodside up 108c to 5836c.
  • Gold down $27.70 to $915.20. Newcrest down 101c to 3233c.
  • US Bonds up with the 10 year yield down to 3.71%.

Macarthur Coal (MCC) making the news this morning – it confirmed it has been approached by a third party. The AFR were onto it this morning reporting that former CEO and founder Ken Talbot was planning to sell his 24% stake. No formal written offer has been made and the talks with the unidentified third party remain incomplete. MCC up 13.1% to 1499c.

  • The other big news is Wesfarmers (WES) has announced plans to raise $2.5bn through a rights issue to fund its $18bn Coles Group acquisition. They have arranged other funding as well including an $800m bridging loan. It will offer one share for every 8 already owned at 2900c a share. Retail prospectus available. WES will remain in a trading halt until Monday April 28. Last traded at 3697c. Initial broker reaction to the rights issue is positive relative to increased debt financing. They have confirmed 2008 earnings guidance and a dividend of at least $2 a share. Theoretical Ex rights price is 3608c giving a 5.5% yield.
  • Fortescue Metals (FMG) CEO Andrew Forrest told the newswires that the first shipment from its major development is on track to sail “inside a month” and that the first ship will arrive within 2 to 3 weeks, in line with the company’s mid-May forecasts. FMG up 16c to 734c.
  • United Group (UGL) had won a contract worth a total of $145m across its infrastructure and rail division sin Australasia. UGL up 8c to 1384c.
  • Qantas Airways (QAN) announced it will form a jet engine maintenance JV with Lufthansa Technik and has signed a 10 year agreement with the global maintenance repair organization to service its General Electric aircraft engines in Melbourne. It also said it will sell a 50% stake in its Jet Turbine Services subsidiary. QAN up 3c to 361c.
  • According to London’s Sunday Times, Ramsay Health (RHC) has signed agreement to operate a new EUR100m hospital in Limerick, Ireland. RHC up 23c top 1173c.
  • Asciano Group (AIO) announced Asciano consortium is the preferred bidder for the $7bn Saudi Landbridge Project. It will hold a 5% stake in the consortium. AIO up 19c to 414c.
  • Challenger Financial Services Group (CGF) announced assets and loans under management fell 4.3% in the March Q to $45.2bn. Director Sarina Russo also resigned as a director. CGF up 4c to 204c.

Other features today – Leighton Holdings up 4.1%, WorleyParsons up 5.0%, Lend Lease up 4.1%, strong performance from Property Trusts, Transport stocks, Building stocks, Rural stocks, Zinc stocks, Gold stocks lagging.

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Peter Fray

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