The market is down 3 after being up 63 in early trading. The SFE Futures predicted a 63 point rise in the market this morning. Financials were up 1.3% early on the confidence gained from the likely safe passage of the bailout bill through the Senate. Financials down 0.1% however at midday. Resources up 0.8% early but down 0.9% at midday. Property down 1.9%.
The Dow was up 196 – was up all session and up 304 at best. Congressmen agreeing “in principle” on the government’s financial rescue package gave the market confidence despite the worsening economic data for August Durable Goods, New Home Sales and weekly Jobless numbers. Washington Mutual – largest saving and loan – was also down another 25% with potential suitors for the company stepping back due to lack of clarity over the bailout program and how it would benefit WaMu.
Lawmakers are still fleshing out the US$700bn bailout plan. It is yet to be passed through Congress and signed into law by President Bush, but it is likely to give the government an equity stake in all but the smallest of companies in exchange for taking troubled assets onto the nation’s balance sheet – it will have increased provisions strengthening oversight, preventing foreclosures and providing tax-payer protection through executive compensation arrangements. The US$700 package will most likely be developed in tranches – not all at once.
· Resources up – Both BHP and RIO up in ADR form overnight, 1.83% and 0.69% respectively. Anglo up 2.49%.
· Metals mostly up – Copper up 0.51%, Zinc up 0.68% and Aluminium up 0.37%. Nickel down 0.72%.
· Oil price up $4.70 to $111.54 on hopes the bailout program will stimulate economic activity.
· Gold down $13 to $882
· Bonds down with the 10 year yield up to 3.84% from 3.81%.
Macquarie Group (MQG) has announced it is selling its Australian Investment Lending business saying it is increasing the cost of funding. It only contributes less than 1% of the group profits and won’t make a material financial impact. It is currently in talks with potential buyers and hopes to be able to continue to provide investment loan products to its clients. MQG down 32c to 3893c.
According to the AFR, Energy Australia – NSW’s state owned electricity retailer – has appointed Merrill Lynch to advise them on its privatization. The paper suggests Origin Energy (ORG) is the front runner to buy the business given its appetite to move into the NSW market and use its cashed-up balance sheet. They estimate the business could be worth between $910m and $1.3bn.
Confusion continues to surround Babcock & Brown’s (BNB) big share price rise yesterday. It closed up 37.1% to 233c. The company announced it had no idea what was behind the jump. There is talk of Phil Green conjuring something up now that he is no longer in charge and on the board. BNB up another 10% early this morning.
In Other news…
· AWB Ltd (AWB) – US Class Action against AWB dismissed. AWB up 3c to 298c.
· Allco Finance Group (AFG) up 6.5% as they gain $59.4m from a leasing sale and will use the cash to pay down debt.
· PaperlinX (PPX) down another 6% – down 19% in 3-days after Wednesday announcing a possible equity raising to cut debt. PPX is also fielding offers for its Australian paper arm.
· Fosters (FGL) up 6% early as Deutsche Bank’s purchase of a 5.3% stake is speculated to be on behalf of an overseas corporate who is interested in a takeover.
· Brokers made comment after Brickworks’ (BKW) FY results yesterday. UBS kept BUY and 1430c target. Said net profits of $108m were 13% ahead of UBS’s expectations. Said its property unit experienced a “very strong result”. Macquarie Group said building products continue to struggle. Says recent rate cuts will be positive for the housing market but that it will be some time before any type of recovery. Retained NEUTRAL and 1100c target. BKW down 10c to 1215c.
· Brokers commented on Nufarm’s (NUF) FY08 NPAT of $163.9m, up 36% on-year. GSJB Were maintained their BUY and 1879c target saying the result was 2% above their forecast. Weres expect NUF to continue to deliver strong earnings in the short to medium term. Macquarie Group said the operating cash-flow of $133m was well below their expected $319m forecast and last years $296m. Said result was “solid” but that cash-flow is a concern. Kept OUTPERFORM and 1783c target. Merrills said result was solid. FY09 earnings reaffirmed. Retained BUY with 1900c target. NUF down 10c to 1520c.
MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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