The market is up 69 on the back of a strong session in the US overnight. Resources leading the way – 2.5% up.

Dow up 213. Up all session – 221 at its best. Energy and Retailers led the way with oil spiking over $5 and Wal-Mart and Costco significantly topping expectations. SFE Futures up 79. All 10 sectors up – largest session rise in two months. Wal-Mart up 3.9%, led the retailers up and added positive sentiment to the market before opening, reporting that same store sales were higher than expected, between 2-4% – partly thanks to the government’s stimulus cheque. Costco also up 3.8% – posted higher than expected same-store sales. S&P500 Consumer Discretionary Index up 1.2% – up 10% from its lowest level on March 17 – overall 1Q estimates for consumer index topped analysts’ estimates by the widest margin of any sector. Financials up and Mortgage insures up, unabated despite downgrade of Ambac and MBIA to “AA” from “AAA”. Lehmans rose 7.8% with market believing the ‘worst has already been factored in.’ Jobless claims down significantly more than expected – good news for the economy. Materials (resources) up 3.4% – major steel maker lifted guidance. Major M&A activity boosts market sentiment – $28.1bn deal in Telecom sector. Tech sector up and Airlines up. Next test of sentiment – Friday’s May Employment figures.

  • BHP and RIO up in ADR form overnight, 1.62% and 2.91% respectively. BHP down 1.16% in the UK. BHP up 168c to 4421c. RIO up 325c to 13820c.
  • Metals mixed overnight – Copper down 0.8%, Zinc down 1.5% and Aluminium up 0.8%. Nickel unchanged. Zinifex up 9c to 945c.
  • Oil price up 4.4% to $127.93 – the largest outright gain on record – on signals from the European Central Bank that it may raise interest rates this year and push the US$ down further. Woodside up 236c (4%) to 6099c.
  • Gold down $8.30. Newcrest up 60c to 3137c.
  • US Bonds down with the 10-year yield up to 4.03%.

Virgin Blue Holdings’ (VBA) CEO Brett Godfrey said it will announce its own solutions to pricing pressures next week and dismissed JP Morgan’s analysis that it must lift airfares or face collapse. JP Morgan announced yesterday the company had to lift airfares by 10% or face insolvency. VBA up 1c to 64.5c.

Murchison Metals (MMX) remains in contest with Sinosteel to buy Midwest. Sinosteel has increased its stake in Midwest to 40% – its bid is all cash at $6.38 per share – competing with Murchison’s all scrip $7.12 per share (based on Thursdays trading price). Chinese Sinosteel has upped its resource estimate for Jack Hills iron ore project in WA. MMX up 6c to 386c.

  • AGL Energy Limited (AGK) has completed its debt refinancing program and has raised $550m, including over subscriptions of $50m. It will pay a margin of 90bps pa above the applicable base rates for both tranches. AGK up 8c to 1380c.
  • BHP doing well early – the company said iron ore contract negotiations ongoing with Chinese. Overnight surge in miners in US overnight.
  • Macquarie Group (MQG) planning to start a US bond insurance company for municipal infrastructure bonds – leading a consortium of US institutional investors to start the new company. MQG up 170c to 5560c.
  • Spotless Group (SPT) said it will walk away from its $534m takeover bid of Programmed Maintenance Services (PRG)– EBIT dropped to below $56m minimum required under the bid. SPT up 38c to 329c.
  • Beach Petroleum (BPT) raises $191m with placement of new shares at $1.43 each to institutional and sophisticated retail investors. BPT down 13c to 154c.
  • Cue Energy resources (CUE), of which Oil Search (OSH) is the operator, give their weekly drilling report on Cobra -1A – elevated gas readings recorded. CUE flat. OSH down 6c 598c.
  • Lion Nathan (LNN) – McKenna and Inner Circle to leverage Bacardi Lion. LNN up 5c to 905c.
  • Coeur D’Alene Mines (CXC) to retain the ownership of Rochester mine. CXC up 8c 333c.
  • Clive Peeters (CPR) has issued a profit warning – down 16% – has pushed the rest of the sector down. HVN down 4.3% to 331c, JBH down 1.4% to 961c and DJS down 8c to 347c. CPR down 10c to 45c.
  • Woodside (WPL) flying on the back of stronger oil price overnight, it was up over $5.
  • Australian construction sector activity fell sharply in May – due to higher interest rates and market uncertainty.

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