Our market is struggling today — down 85 or 1.7% — after heavy falls on Wall Street. Property doing most of the damage, down 4.8%, financials down 2.8% and resources struggling falling 1.5% today after a big day of gains yesterday. The main consensus is that although the US government’s package will help, we are still far from being out-of-the-woods. The Dow Futures are suggesting an 11 point rise on Wall Street tonight.
The Dow Jones had a shocker overnight — down 372 – Up 6 at best. Down 396 at worst. Steady descent all session — closed with downward momentum. Nervousness and fear regarding the US$700bn bailout package caused the fall. Concerns are that it won’t stop a US recession. Political disputes as the bill passes through Congress lead to further insecurity. US dollar had its biggest drop ever against the Euro, leading to the biggest single-session jump in the oil price in history.
The opposition wants some accountability from Wall Street if the government is going to bail them out. They want Treasury to receive an equity stake in all participating financial companies, want to limit executive compensation and don’t want to assume any additional unrelated toxic securities off the balance sheets of the distressed. Massive rotation into commodities — gold up $44, base metals all up strongly. S&P 500 wiped out nearly half of its gains from the previous two sessions. US$ fell sharply against the basket of currencies — the dollar Index fell 2.3%. The Euro was up 3.0% against the USD. The Aussie was up 0.82% against the USD to 0.8438.
- Both BHP and RIO up in ADR form, 3.87% and 5.43% respectively. Up 2.21% and 1.73% in the UK.
- Metals all up overnight — Zinc up 3.48%, Nickel up 3.17% and Copper up 2.70%. Aluminium up 0.48%.
- Oil price up 17.8% or $18.56 to $122.61 — it spiked more than $25 at one stage — breaking the record for the biggest one-day gain.
- Gold up $44.50 or 5.1% to $909.
- Bonds unchanged with the 10 year yield at 3.85%.
FKP Property Group (FKP) up around 10% to 464c on takeover talk. Lend Lease says it remains in open talks with the company although no offer is on the table after FKP investor Mulpha received approval to sell part of its stake. Mulpha holds a 17% stake. The stock is down 28% in the past year.
Babcock & Brown Communities (BBC) down 8% down 40c after the AFR said it has received offers for its assets but they are “less than solid”. Lend Lease, who already has 7.27% on the company, is among the interested parties.
- Boom Logistics (BOL) has successfully completed the new $175m 3 year revolving debt facility and a $32m working capital and general transaction banking facility. BOL up 2.5c to 115.5c.
- Sims Group (SGM) has acquired Weinert recycling for an undisclosed sum. They say it is immaterial. SGM down 3.2% to 3233c.
- Oz Minerals (OZL) said production levels were in line with its previously announced plans. Also mentioned that demand for commodities remain strong. OZL up 10c to 170c.
- Macquarie Airports (MAP) has brought forward its $1bn buyback saying it plans to start the buyback as soon as possible using cash reserves. It will continue to seek approval at the October 17 extraordinary meeting. MAP slightly up, 1c to 260c.
- Alliance Resources (AGS) has requested a trading halt pending a release of an update on The Four Mile Project. AGS down 1.5c to 71c.
- Credit Suisse say the coal seam gas assets owned by Molopo Australian (MPO) are undervalued by the market. They see potential upside in MPO of around 150c or 200c. MPO down 4.5c to 115.5c.
- JP Morgan has upped their target price to 2422c from 2295c despite maintaining their UNDERWEIGHT recommendation on National Australia Bank (NAB). They are betting banking stocks will receive a boost from regulatory changes. NAB down 2.1% to 2378c.
- Citi maintain their HOLD recommendation on James Hardie (JHX) and 490c target price after its US investor tour and JHX’s presentations. They believe it could still take time for the housing recession to recover in the US. JHX down 4% to 542c.
- Fed Chairman Bernanke, Treasury Secretary Paulson, SEC Chairman Cox and Federal Housing Finance Agency Director Lockhart will testify before Senate Banking Committee regarding government takeover of Fannie Mae and Freddie Mac and the credit market turmoil.
- Aussie dollar doing slightly better today, now at 84.67c.
MARCUS PADLEY is away on Holidays.
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