The market is up 8. An unremarkable day. Financials down 0.7% after a dull performance overnight in the US. Resources up 0.2% after a strong lead from BHP, RIO and energy stocks in the US. Metal prices up. The SFE Futures were up 15 this morning.

Dow up 40. Up 69 at best. Down 95 at worst. Main Point: Financials down 1% on Freddie Mac and AIG’s ugly results and Morgan Stanley freezing home-loans. Energy and resources outperformed on good results. 6 out of 10 sectors up – indexes at 6-week highs. Dow encouragingly turned around a 0.7% loss to make a 0.3% gain holding onto the 331 or 3% gain yesterday. Large cap techs offset bad news in the financials. Nasdaq up 1.2% on better-than-expected results from Cisco. Oil price down 5.4% for the week already. Resources up 1% with BHP and RIO up strongly – up 4.36% and 4.72%. Energy outperformed – up 1.9% on better-than-expected results from Devon Energy. Refiners up with Tesoro and Valero up 12% and 7%. Sunoco up 3.3%. Freeport-McMoRan up 11%. Morgan Stanley froze the home-equity lines of credit for thousands of clients while their homes dropped in value. Telecoms down 1.4% – underperformed – Sprint Nextel and Qwest both reported a lost subscribers. USD climbed to 8-week high against the euro and 7-month highs against the yen – the global slowdown and less fears of inflation are helping the USD to rise.

  • Both BHP and RIO up in ADR form overnight, 4.36% and 4.72% respectively. BHP down 6c to 3716c. RIO up 110c to 11550c.
  • Metals mostly up overnight – Nickel up 1.17%, Zinc up 1.1% and Lead 2.53%. Aluminium up 0.21%. Oz Minerals up 2c to 176c.
  • Oil price down 14c to $118.57 after the U.S. Energy Department’s EIA said crude inventories increased by 1.7m barrels to 296.9m for the week ended Aug. 1, slightly more than the 1.2m-barrel increase expected. Woodside up 77c to 5149c.
  • Gold down $3 to $878.80. Newcrest down 40c to 2500c.
  • US Bonds down with the 10 year yield up to 4.05% from 4.02%.

Nickel and copper stocks mostly up on a small bounce in metal prices (although copper futures dropping intraday). KZL up 2%, JML up 4,4%, WSA up 0.4% and PAN up 3.5%. Banks down again, NAB down 2.1% and CBA down 0.8%. Big industrials up with a sentiment change towards the consumer discretionaries after the RBA flip flopped their bias towards rate cuts on Tuesday. WOW up 1.5%, WDC up 1.5% and WES up 1.2%.

Unemployment numbers are out at 4.3% – steady on last month – new jobs strong. A$ jumped on the numbers. The European Central Bank makes an interest rate decision tonight. Expected to remain hawkish on rates and leave them where they are. Dow Jones Futures down a worrying 47 at the moment. Enough to keep you out of an overnight trade.

Company news

  • Tabcorp (TAH) up 6% early on results – booked a hefty loss but underlying results in-line and there was some relief they were not worse. Market happy with solid underlying earnings and dividend being kept.
  • Connecteast (CEU) down 16% early on “disappointing” first week of tolling falling to half the rate of toll-free period – UBS also downgraded the stock.
  • Minara Resources’ (MRE) weak 1H report shows net profit down 80% on-year with no interim dividend – below consensus. Our analyst thought they’d fall over…but only down 2.7%.
  • Fortescue (FMG) signs a rail and port agreement with Atlas Iron to give AGO access to their rail and Herb Elliot Port – Atlas Iron (AGO) up 14% early on the announcement.
  • West Australia Newspapers (WAN) downgraded by brokers on poor FY08 results yesterday and cautious FY09 outlook – seen as a warning to all media companies….but up 4.13%.
  • News Corp (NWS) kept mostly at a BUY by brokers after they posted results and positive guidance yesterday. A falling A$ helps. Down 3.11% or 52c to 1621c.
  • ResMed (RMD) had its target price boosted by Credit Suisse after results yesterday showing positive top-line revenue growth. Up another 3% today.
  • UBS has downgraded the Infrastructure sector after reviewing their cost of equity assumptions.
  • Merrills says CBA’s crucial results on the 13th are unlikely to surprise due to fairly good transparency around solid volume growth, improved margins and bad & doubtful debts at 23bps of total loans. Says CBA is under-provisioned yet has limited exposure to single-names. Down 25c to 4360c.
  • Merrills expecting Telstra’s August 18th FY08 result to be “very strong” with net profit up 14.4% and management’s long-term guidance to be upgraded. TLS up 4c to 453c.
  • St George Bank has a briefing next Tuesday. SGB up 13c to 2898c.
  • Corporate Express (CXP) downgraded by brokers post yesterday’s results showing falling customer sales and deteriorating market. Down 2%.

We have an article in the MARCUS TODAY newsletter today called “Advice from a Billionaire”. Robert Friedland visited our office yesterday with a number of comments on the market and his disappointing IPO Ivanhoe Australia (listed at 200c this week….now 166c). His other comments include the view that Oxiana was crazy to link up with Zinifex – thinks OXR watered itself down by adding Zinc to the mix – says zinc is the “dog… “woof…woof..” of the metals. 7 brokers are on the consensus database with recommendations on Oz Minerals at the moment. 6 have BUY recommendations. The stock is down 58.8% from its highs and is following the zinc price. Until that turns the stock is going to keep going one way.

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Peter Fray

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