The Market is down 101 and below 5000 again (4983). SFE Futures suggested a 17 point fall in the market this morning on the back of a closed Wall ST on Friday and a fall in European Markets of an average 1.3%.

Resources down 1.9%, Financials down 2.3%, Property Trusts down 5.2% after a profit warning from GPT which including a warning of tough conditions for the rest of the year.

Dow closed on Friday. Friday’s European news: All the European Indexes downFTSE100 down 1.16%. Germany down 1.3%. France down 1.8%. Financials down – Main issue was the banks. Goldmans research note making some headlines – says European banks might have to raise another 90bn Euros and give up a years worth of dividends to restore balance sheets with continuing fallout from the credit crisis. Banco Santander fell 4.3%, Royal Bank of Scotland down 3.2%, BNP Paribas down 2.8%, UBS fell 2.6%. In the UK the Bradford & Bingley Building Society fell 18% on the news they will have to increase their capital raising by 400m GBP after U.S. private equity investor TPG Capital pulled out of buying a stake. The DJ Stoxx bank index is down 35% so far in 2008 and fell another 3% on Friday.

BHP was up 0.8% and RIO up 2.56% in the UK. BHP down 1.9% and under $40 this morning. RIO down 2.2% or 273c to $129.97 this morning.

Gold PM fix in the UK down $2.75. Newcrest down 4% this morning with Lihir down 3.5%. St Barbara Mines down 10% and is now down 27% in less than a month.

Some weekend comment that 20% of world zinc output is being called into question in the face of falling zinc prices with mines in China and Canada operating at a loss. Chinese operations face the greatest risk of closure. The outlook for the zinc price is not good without it. Oxiana down 5.2% today (recently bought Zinifex).

  • GPT Group (GPT) falls 15% in early trading on slashing its forecast operating income by 27% to $464m – the company has cut its 2008 EPS forecast from 28.1c to 21.2c and its full year distribution forecast from 28.9c to 20c – they tell us to expect difficult conditions for the balance of the year because of the continuing deterioration in global financial, credit and property markets and their effect on real estate companies. On the back of that the Property Trust sector has been flattened – down 3.4%.
  • JP Morgan notes the “troubled companies” exposures of the major banks in light of the news of ANZ’s $260m secured exposure to Chimaera. ANZ’s total “troubled companies” exposure is $3.082bn, CBA’s $2.515bn, NAB’s $1.832bn, WBC’s $1.16bn and St George’s $581m. “Thus far, the default setting of most investors is that these single-name exposures are one-offs; however, we note that the balances involved are not small and the list is growing… there is a real risk that these troubled loans are the fist wave of a new loan-loss cycle for Australian banks given that only a small proportion of business borrowers will have thus far faced the burden of sharply higher lending rates.” Most of the Banks are down about 2% this morning.
  • The HIA Performance of Construction Index was down 3.4 points to 40.3 in June – the 4th consecutive monthly decline – another hint that domestic demand is slowing.
  • The European Commission has started their in-depth investigation into the $170bn BHP-RIO takeover. Seems unlikely to create any major problems.
  • Challenger Financial Services (CGF) will initiate an on-market buy back of 10% of issued capital. “The company has a low net debt position, a strong capital surplus in its prudentially regulated life company, and strong operating cash flow…This has created the opportunity to commence an on-market share buyback program from July 21, 2008.” CGF up 6c to 211c.
  • Origin Energy (ORG) – According to the AFR on the weekend ORG has received submissions from BP, Chevron and government backed Asian groups, for its Coal Seam Gas (CSG) reserves and for various LNG partnerships. They bhave rejected the BG Group bid and the next move is expected to be an upped bid from BG. ORG now 1605c down 10c.
  • Suggestions that Westpac will have to up their agreed bid for St George or walk away.
  • IAG (IAG) will release on Wednesday the details of its “wide ranging review” after having rejected QBE’s takeover in May. Next couple of days will carry speculation about dividend cuts, asset sales and cutting of jobs. IAG down 8c to 361c.
  • ABN AMRO downgrades Bendigo & Adelaide Bank to a SELL. BEN down 3.2%.
  • GRD up a bit on a positive market update saying the GRD share price “does not in any way reflect the value of such a solid engineering business in the current resources cycle”.
  • Flinders Mines (FMS) up in early trading, on the announcement of an $8m drill program starting today. First results next month. Some market commentary the nickel and zinc markets remaining in surplus until some capacity is closed down. Not the best outlook for either metal. Citigroup has a research report out.
  • Paladin up a touch – got written up on the back of the AFR. Talk of an eventual takeover.
  • Citigroup tell us we are in Phase 1 of the downgrade cycle for Australian stocks and that we have Phase 2 and 3 to go. Sectors they are cautious about include: building materials, food and food retail, beverages, healthcare, gaming and media. Also becoming cautious on previously good cyclical sectors like steel, chemicals, base metals.
  • Macquarie says “The fear that coal is a speculative bubble is in our view overdone” although others note Ken Talbot “selling at the top” by off loading a 14.8% stake in Macarthur Coal (he retains around 5%). Ken Talbot now worth $1.4bn.