It’s a horrid day — we are down 148 — after Wall Street lost nearly 300 points and the NAB announced a higher than expected provision. The announcement has sent Financials down 5.5% and the Property Trust sector down 5%. It has also put paid the financial recovery and leaves us fretting about the CBA results on August 13th.

The Dow fell 283 overnight (having jumped 170 in the last two days). Up 2 at best. Down 287 at worst. Closed on its lows. It was the June Home Sales numbers that did most of the damage, they were down 2.6% on the month, there lowest level in a decade, and well below the 1% drop expected. Just goes to show the housing market is the US is far from bottoming. Builders had their biggest one day fall ever as a result. Financials down 6.7% — Washington Mutual, Fannie Mae and Freddie Macquarie led the falls. Financials had their worst one-day drop in eight years after a 34% rally in 6-days – the most any sector index has risen in such a short time-frame in the history of the indexes which started in 1989. All 10 sectors down. Last weeks initial jobless claims came in above 400,000 for the second time in a month — totaled 406,000, up 34,000 from the prior week and 26,000 more than expected. NASDAQ lost 1.9% – Amazon posted much-better-than-expected results and raised revenue guidance for the year – up 11.6%.

  • Both BHP and RIO down in ADR form overnight, 4.8% and 3.39% respectively.
  • Metals all down overnight – Nickel down 5.9%, Zinc down 3.5% and Copper 2.05%. Aluminium down 1.86%.
  • Oil price up 89c to $124.62 – the price is up only once in the past 7 days.
  • Gold down 50c to $922.30
  • Bonds up with the 10 year yield down to 4.02% from 4.12%.

The main story is the banks getting smashed on the back of the NAB announcement.

National Australia Bank (NAB) announced it plans additional provision of $830m for its portfolio of 10 collateralized debt obligations of asset-backed securities. Not good considering the market was expecting some merger and acquisition activity. The amount is in addition to the $181m charge taken in its 1H result. CEO John Stewart says, “We believe it is prudent to take a full provision now, based on a worst-case scenario”. NAB says the final dividend will be unaffected by the provision. There are still concerns about the NAB’s UK exposure, where the economy is slipping into a recession according to The Economist. It was down 12% at once stage. NAB now down 10.3% to 2755c.

In other news…

  • Energy Resources of Australia (ERA) has announced a $38.9m net profit, up from $5.7m last year. It will pay an interim dividend of 8c and appointed Rob Atkinson as its new CEO. Described as solid and were at high end of consensus. ERA down 2.4% to 2264c.
  • Resources rebounding well after initial loses. BHP now down 28c to 3728c, down 3% at one stage and RIO down only 20c to 11500c.
  • BHP Billiton and partner Exxon Mobil have approved the $1.4bn Turrum oil and gas field off the southeast of Australian. BHP has also approved expenditure of US$625m for development of the field.
  • Amidst overtones of Terminator BHP is going to follow RIO into the futuristic world of driverless trucks, to match their commitment to driverless trains. It is expected to be safer and more productive.
  • Talk of Leighton undertaking $500m capital raising which will coincide with its results on August 14th. They join the list of other companies raising capital including banks, AIO, Orica, Incitec Pivot (IPL down 9.5% yesterday). LEI down 239c to 4480c.
  • Dubai-based Nakheel has upped its stake in Mirvac (MGR) to 13.37% from 12.57%. MGR down 11c to 251c.
  • Plenty of research on Newcrest this morning after its production figures yesterday. UBS Warburg moves to NEUTRAL from Buy and cuts target to 3858 from 4100c and GSJB Were maintain their Buy recommendation and 3900c target price. NCM down 80c to 2860c. Log into Marcus to read the rest of today’s broker comments and access our broker archive that runs to over a years worth of broker recommendations.
  • Santos also announced production numbers yesterday. GSJB Were maintain their HOLD recommendation and 2500c target price. STO up 15c to 1713c.
  • Credit Suisse say that Seven Network (SEV) could reach a majority stake in WA News (WAN) by July 2013 if it continues to buy 3% every 6 months. SEV upped its stake in WAN yesterday to 22.3%. Bought 4m shares in WAN at 1025c yesterday morning. WAN closed the day down 9c to 911c. SEV down 2c to 784c.
  • Newmont Mining (NEM) has announced a $277m profit compared to a loss of $2.1bn last year. Revenue was up 19% to $1.5bn helped by the big gains in the gold price. Costs in 2Q up $7 an ounce from last year. NEM up 21c to 505c.
  • Origin (ORG) says it welcomes investment opportunities identified in esaa report on emissions trading. ORG down 11c to 1602c.
  • Salmat (SLM) has provided a guidance update – expect net profit for FY08 to be in the range of $11m to $13m. SLM down 9c to 279c.
  • Strike Resources is in a trading halt. SRK last traded at 197.5c.
  • Rubicon Japan (RJT) up 48% after AFG said RJT removed all foreign currency hedges, freeing up cash to repay short term debt. RJT up 5.9c to 14c.

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