The market is finishing the week will a burst – up 97. The big four banks have accounted for 34 points of that rise. The SFE Futures predicted a 71 point gain in the market this morning.

Dow Jones closed up 189 – Highest close since January. First close in the Dow above 13,000 since 3 January. Dow down just 1.9% on the year now. Dow up 200 plus at its highest. Still 8.5% off its high in October. S&P finished above 1400 – the first time this year. Financials did well, but resources let the market down. The Fed rate cut yesterday is being seen as the last for a while. They are shifting from a credit market concern to an inflation concern. This is a significant change in attitude already reflected in higher bond yields and something that is likely to support a stronger US$. The unfortunate thing for Australia is that a higher US$ means lower commodity prices and the overnight session has been notable for the weakness in resources and the strength in financials – something that has been repeated in our market today. PE on the S&P 500 now 15.3x. We have Jobs numbers tonight.

  • Both BHP and RIO down in ADR form on Friday, 0.82% and 1.28% respectively. BHP up 26c to 4316c and RIO up 50c to 13650c.
  • Metals all down – Copper down 4%, Nickel down 2.8% and Aluminium 2.4%. Zinc down 1.8%. Zinifex down 12c to 976c.
  • Oil price down $1.10 to $112.60 after a strike that cut production at an Exxon Mobil facility in Nigeria ended. Woodside down 36c to 5653c.
  • Gold down $14.20 to $850.90. Newcrest down 4.6% to 2765c.
  • US Bonds down with 10 year yields up to 3.76%.

CREDIT MARKET CONCERNS OVERDONE – There was a rally in financials in the US overnight (up 3.9%) helped by a Bank of England statement (bi-annual statement on financial stability) that banks have overestimated their exposure to subprime and the credit markets. The rally was also helped by the Kuwait sovereign fund (worth $250bn) saying it was going to up their stake in both Merrill Lynch and Citigroup and was hunting across Europe for investments in the financial sector.

Making the news today…

  • Santos held its AGM today – It announced it is looking for partners for its Gladstone liquefied natural gas project in QLD and is at “the preliminary stages of considering various other potential strategic initiatives.” It also told the market is has no idea why the share price has raced ahead recently (up 9% yesterday), but mentioned it could have something to do with BG Group’s $12.9bn offer for Origin Energy. Santos is on a PE of 23.4x and a yield of 2.3%. Not exactly flashing value. Price down 3% this morning first thing. Now down 17c to 1719c.
  • According to Bloomberg, WorleyParsons has agreed to carry out work on a $12bn chemicals complex in Abu Dhabi. No announcement from WOR, but the stock price is up 6.8% to 4070c.
  • Woolworths (WOW) is yet to decide whether it will bid for The Warehouse Group in the current environment saying, “Equity markets are down 20%, the New Zealand economy itself is performing less well.” WOW up 32c to 1837c.
  • Babcock & Brown Infrastructure Group (BBI) said its fully-owned U.K. ports operator BD Ports has signed a contract with retailer Tesco to build an import centre at Teesport in the UK. BBI up 1.5c to 115.5c.
  • Murchison Metals (MMX) said it hasn’t been in talks with China’s Sinosteel Corp, contrary to media speculation. Lots of talk recently about Sinosteel swallowing up Midwest and then having a crack at Murchinson, which makes sense since it has nearby projects. MMX down 8c to 472c but is up from 403c on Monday.
  • ResMed (RMD) announced its 3Q earnings result in the US overnight – earned $29.7m, up from a $15.4m loss last year. RMD up 9c to 549c.
  • Justice Ray Finkelstein of the Federal court has ruled in favour of ANZ Banking Group (ANZ) over its Opes Prime handling. The decision means it is unlikely that we will see more court cases against Opes Prime and its lender ANZ. ANZ up 4% to 2251c.
  • APA Group (APA) said it will raise up to $500m by setting up an unlisted investment vehicle for its assets that have consistent annual revenues. APA down 3c to 231c.
  • Sedgman (SDM) announced a strategic investment in Exergen, a clean coal technology company. Were’s expects the investment to be in terms of monetary value.
  • Retailers going OK today after retail sales fell 0.1% for the 1Q after a 1.3% rise in the previous quarter. HVN up 7c to 363c, BBG up 33c to 1228c.
  • GSJB Were has upped their recommendation on Fortescue Metals (FMG) to BUY from HOLD. They have a 962c target price but warn, “FMG remains a high risk, high return proposition”. FMG up 3.6% to 807c.

Next week – RBA Meeting, Interim results from the NAB and St George, ANZ ex dividend on Thursday, News Corp results. This weekend is the Berkshire Hathaway AGM – expect lots of commentary. The market is now up 11.8% from the bottom and is still 16.7% off its high. The Banks are 14% off the bottom and still 27.4% off their high. In the MARCUS TODAY newsletter today we look at the perils of joining a stock picking competition in the national press.

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