Our market is doing OK after yesterday’s heavy falls – up 40 – good result considering the SFE futures suggested a 16 point rise in the market this morning. Resources underperforming – down 0.2% and Financials making a bit of a recovery. All of the big four banks announced small exposures to Lehman’s.

Volatility is the best way to describe the session on Wall Street overnight – the Dow Jones closed up 141 – not before switching between positive and negative territory 25 times throughout the session. Dow was up 176 at best. Down 175 at worst. The market initially fell, then rallied on hopes the Federal Reserve would cut rates, then fell over again after the Fed left rates unchanged at 2% and then jumped towards the end of the session on talk that the Fed will bail out AIG. Those rumours have been confirmed by the Fed this morning, as they posted a statement on their website saying they will put on their white knight costume yet again and lend AIG $US85bn. A massive relief for global markets – another giant bankruptcy would have caused unpredictable consequences for global financial markets. AIG has $1.1 trillion in assets and 74 million clients in 130 countries. The Dow Futures are already suggesting a 52 point rise on Wall Street tonight. There is also talk of JP Morgan buying up Washington Mutual and Barclays buying the Lehman’s investment banking division.

  • BHP up 3.05% in ADR form overnight, RIO down 0.26%. Both down in the UK.
  • Metals all down – Nickel down 4.03%, Aluminium down 1.51% and Zinc down 0.96%. Copper down 0.76%.
  • Oil price down $4.03 or 4.2% to $91.49 on concerns about a US economic slowdown affecting energy demand. The price is now down $10 in the past two sessions.
  • Gold down $6.50 to $780.50
  • US Bonds down with the 10 year yield up to 3.52% from 3.41%.

Austock has cut its target price for National Australia Bank (NAB) to 2400c from 2600c and maintain their SELL recommendation saying expectations of $1.5bn bad debt provisions against corporate CDS will weigh on the stock. It also lowered its FY09 dividend to 190c a share. GSJB Were mentioned this morning that our major banks might have small exposures to Lehmans but see bigger impacts in the secondary round of exposures which are not quantified at this point.

GSJB Were says contract iron prices are likely to record a 7th consecutive increase in the next round of negotiations. It is forecasting an 18% plus increase in contract prices and say, “We also believe that Australian suppliers are well positioned over the medium term to gain a bigger share of the fast growing Chinese import market for iron ore – a powerful combination of price and volume gains”. BHP down 16c to 3629c, RIO down 2.6% to 10405 and Fortescue down 0.4% to 557c.

Making the news today…apart from the AIG developments, it’s a pretty quiet day on our market.

  • Macquarie Group (MQG) has labeled the article in The Australian this morning as “false and inconsistent”. The report suggested MQG needs to refinance $45bn of debt and that $5bn needed to be refinanced by early next year. They highlight the $20bn worth of liquid assets on their balance sheet. MQG down 2.7% to 3582c.
  • Seek (SEK) has continued its international expansion plans by taking a 10% stake in Malaysian employment website provider JobStreet Corp Berhad for $19.3m. SEK up 6c to 522c.
  • Babcock & Brown Wind Partners (BBW) up 25% to 110c – after U.K.-based Children’s Investment Fund Management took a 5.29% stake and confirmed its distribution guidance.
  • Origin Energy (ORG) and JV partner say they will waive the condition in their proposed transaction relating to BG Group takeover offer for Origin. This comes on the back of BG’s announcement that it would let its takeover bid for Origin lapse. The only condition now for the ConocoPhillips deal proceeding is FIRB approval. ORG down 5c to 1635c.
  • Westpac Bank (WBC) said it may periodically sell up to $2 billion in debt securities. WBC down 14c to 2312c.
  • RBA Glenn Stevens will speak at the AICD lunch around 3pm today and he will be answering questions on the back of this weeks events on Wall Street.
  • Credit Suisse cut their target price on Alesco (ALS) to 670c from 772c and maintain their Neutral recommendation after announcing a profit warning. ALS down 22c to 568c.
  • Deutsche Bank maintain their BUY recommendation on Western Australian News (WAN) and 915c target price saying the company’s fundamentals do not change because of the two SEV directors joining the WAN board. SEV down 3c to 742c and WAN up 2.3% to 864c.

MARCUS PADLEY is away on Holidays.

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