The market is down 160 on the back of the Dow Jones closing 450 points lower. The SFE Futures predicted a 153 point fall this morning. Financials falling steeply – down 4.9% as the continued credit-crisis turmoil surrounds the future solvency of major US banks. All sectors in the red – industrials down 5.2% and property down 4.6%.
Overnight the Dow plummeted 449. The S&P 500 has lost nearly 10% in just two sessions this week and is down 7.6% week-to-date – having wiped off half the gains made in the 5-year bull market and is 26% off its October all-time high. Financials fell another 8.9% as the Fed’s $85bn loan to AIG failed to stem fears about the US’s largest financial institutions collapsing. The Fed said an uncontrolled failure of AIG would have added to the financial instability of world economies. Lehmans was down another 57% after filing for a $613bn bankruptcy and selling it investment banking arm on Tuesday. Goldman Sachs and Morgan Stanley are the only two independent brokerages left on Wall Street – both fell sharply with Goldmans having its steepest fall in its history – down 14% and 24% – as Meredith Whitney form Oppenheimer and a Merrill’s analyst downgraded the bank’s 4Q profit estimates. After Washington Mutual’s March rejection of a JP Morgan takeover offer, it has now removed a $1.5bn obstacle to a possible potential takeover acquisition.
Treasury set up an additional financing program to auction Treasury bills to help raise money for the Fed’s creaking balance sheet which is under substantial pressure. 3-month Treasuries up steeply on a flight to quality with the yield down to only 0.04% – the lowest yield since World War II. The US dollar was down 1.2% – down 1.4% against the euro and down 1.9% against the pound. It was up against the Aussie.
In a massive flight to safety, hard assets like oil, gold and commodities spiked on market concerns about Treasury lending to the Fed. Newmont Mining up 9.4% as precious metals soared. Commodities overall were up 3.2%. Metals all solidly down. Resource stocks down – BHP and RIO down 5.37% and 7.73% in ADR form. US Homebuilders were down 7.4% on poor housing start data and a continuing crisis in America’s residential mortgage market.
- Metals all down overnight – Nickel down 2.34%, Zinc down 1.80% and Copper down 1.69%. Aluminium down 1.33%.
- Oil price up $5.90 to $97.39 but analysts’ say we are unlikely to see oil rally sharply on the back of the economic downturn hurting demand. The government announcing lower-than-expected inventories also helped the bounce.
- Gold up a massive $70 or 9% to $850.50 – the largest ever single day gain in dollar terms.
- US Bonds up with the 10 year yield down to 3.41% from 3.43%.
- VIX Volatility index down 19.54% to 36.22.
Macquarie Group (MQG) is getting hit hard today – down 13.7% to 2934c (down 21% at one stage) – on concerns about its outlook. It is back to 2003 levels and has told the market it has no idea why the share price is behaving the way it is. Concerns are growing about its outlook. One analyst has told the wires that it is hostage to hedge fund sentiment and that he can’t see a share price catalyst in the near future. Despite the mayhem, JP Morgan maintain their Overweight recommendation and cut their target price slightly to 7158c from 7285c.
National Australia Bank (NAB) is down 7.8% to 1929c and underperforming the rest of the banks (CBA down 3.3%, WBC down 3.5%, ANZ down 3.4%) mainly because of its UK presence through its Clydesdale and Yorkshire banks. The British banking system is also in disarray with Lloyds Group buying mortgage lender HBOS in a deal brokered by Prime Minister Gordon Brown. Analysts are suggesting that the NAB could make further write-downs.
Making the news today….
SUNCORP-METWAY – There are concerns about its property exposure and funding ability despite S&P affirming it’s A+ rating. It is yet to mention its exposure to troubled property group Raptis Group estimated to be around $100m, but concerns continue to mount around their funding requirements. SUN down 13% to 774c.
Leighton Holdings (LEI) announced it has raised around $700m from a 1-for-14 share entitlement offer for retailer investors. LEI down 232c to 3847c.
OZ Minerals (OZL) says it plans to cut zinc production at its Golden Grove mine by 50,000 tonnes in 2009 because of falling commodity prices. OZL down 0.5c to 138.5c.
The Gold sector is the only shining light after a huge rise in the Gold price overnight. Newcrest (NCM) up 3% at 2420c, Lihir Gold (LGL) up 14% at 254c, Sino Gold (SGX) up 18%, Avoca (AVO) 11%, Resolute (RSG) 13%.
Seek (SEK) announce they will pay US$67.5m for a 30% stake in Brazilian employment website owner Brasil Online Holdings. It will fund the buy from a $200m syndicated loan facility. Consolidated Media Holdings will also hold a 5% stake in the site. SEK down 2c to 522c.
Sinosteel Corp has lifted its stake in Midwest Corp (MIS) to 98.5% and will now compulsorily acquire the rest of the shares. MIS down 11c to 625c.
Bank of Queensland (BOQ) has reaffirmed its earnings guidance in a hope of stopping the share price heading south. No chance. BOQ down 4.8%.
Toll Holdings announced its CFO Neil Chatfield will resign in March 2009. TOL down 52c to 700c.
Macquarie Equities maintain their Underperform recommendation and 440c target price on James Hardie (JHX) saying it would have significant leverage to a recover in the US housing market but its could well be way off before we see any. JHX down 38c to 483c.
Huntley Investment (HIC) has received an all-share takeover offer from Brickworks Investment (BKI) worth around $126m. It is offering HIC investors 0.6 of its own shares for each HIC share held. HIC down 3.5c to 69.5c.
Value Fund 452 Capital run by Peter Morgan no longer sees value in Amcor (AMC) announcing it ceases to be a substantial shareholder. AMC down 6.5% to 599c.
69 companies in the All Ords have hit a fresh 52 week low.
MARCUS PADLEY is away on Holidays.
For a free 21 day obligation free trial of the MARCUS TODAY newsletter (and no we won’t ask for a credit card number) please go to our FREE TRIAL SIGN UP PAGE – you will receive two daily emails about the stockmarket, our MORNING EMAIL with all the stuff you need to know ahead of the trading day ahead and a DAILY EMAIL with all the midday events, news, comments and Ideas from Marcus and his Team. You will also be given a password to the MARCUS TODAY website including access to all the emails as well as Educational, Entertaining and Researched Articles from Marcus and his Team and an archive where you can catch up on a whole week or month in just a few minutes. Or Browse at length. We are sure you will enjoy and profit from what we offer. Find out now. GET STARTED and hopefully one day we will Welcome you onto the Membership List. We have one of the highest re-subscription rates in the financial newsletter industry. Thousands of subscribers enjoy and profit from our services every day. Join us.