Our market has started the week off in a disappointing fashion — down 13 at midday — the SFE Futures suggested a 48 point rise this morning. Up 52 at best, down 12 at worst.

The Dow Jones closed up 121 on Friday — Congressional leaders “tentatively” finalised the $700bn financial rescue plan Sunday with senators expected to vote it through on Monday. The intervention is the largest since the Great Depression. The critical point to note is that the hammered-out bill in its newest form will ensure spending is controlled by both the White House and Congress.

The Dow Jones and S&P 500 finish higher, the NASDAQ was down. Financials closed up 3.2%. But concerns remain that the bailout package will not be able to prevent a US recession. Resources down heavily on falling oil and metal prices and fears of a global slowdown. Gold up. Washington Mutual collapsed after falling 96% over the week — down another 91% Friday. The US’s largest savings and loan was taken over by federal regulators after depositors had withdrawn $16.7bn since September 16th. JP Morgan has bought most of WaMu’s deposits and branches. Wachovia was down another 27% and are close to collapse — Citigroup, Bank of America and others are sitting patiently and waiting until the administrators march in, before they make their predatory moves to cherry-pick the best assets and palm the scraps off to the government to sought out.

  • Both BHP and RIO down in ADR form on Friday, 5.48% and 7.51% respectively.
  • Metals all down on Friday — Copper down 2.15%, Zinc down 1.75% and Aluminium down 0.85%. Nickel down 0.56%.
  • Oil price down $4.77 to $106.77 on concerns that the bailout package will not be enough to prevent a US recession.
  • Gold up $6.50 to $888.50
  • Bonds up with the 10 year yield down to 3.85%

According to a survey by the newswires, economists are expecting the RBA to cut interest rates by 25bps to 6.75% at the October meeting. And for the December meeting, the majority of economists expect a further cut of 25bps, with a couple predicting a cut of 50bps. The RBA is expected to make a decision on October 9.

Credit Suisse has cut their EPS forecasts for Australian commercial banks with major the bank’s 3yr compound annual growth rate cut to 0% from 2%. They have cut their credit growth assumptions and lifted their bad debt charges on National Australia Bank (NAB). Their order of preference remains the CBA, WBC, SGB and then the NAB. They expect other brokers to follow their lead and cut EPS estimates.

  • Australian Foundation Investment Co (AFI) has told investors that it remains nervous regarding the flow-on effects of a struggling US and global economy and says local earnings outlook is subdued. They have recently make purchases in Telstra ($15.8m), Alumina ($9m), NAB ($8.3m), Orica ($6.3m), Woodside ($5.8m) and QLD Gas ($4.8m). Their two biggest holdings remain BHP ($332.3m worth) and RIO ($332.2m). AFI up 9c to 504c.
  • Futuris Corp (FCL) announced that Malcolm Jackman has been appointed CEO and MD of the company effective immediately. GSJB Were has a BUY recommendation on the stock with a 170c target price. FCL up 3.5c to 152.5c.
  • Talk is that new ROC Oil CEO Bruce Clement will be making a few changes to the company’s portfolio. GSJB Were says the company is reaching a “potentially significant inflection point” and are concerned that, given its acquisition history, it might make some unattractive and/or dilutive acquisitions. They have a HOLD recommendation and 200c target price. ROC down 2c to 115c.
  • Fairfax Media (FXJ) is considering selling its Southern Star TV production unit, only a month after selling off Southern Star’s stake in Carnival in the UK. It says it is talks with potential buyers and is considering strategic partnerships. FXJ down 3c to 280c.
  • Felix Resources (FLX) says it is in talks with a number of interested parties over a potential sale of their operations. It expects to make an announcement in the next couple of weeks. FLX up 112c to 1912c.
  • Sundance Resources (SDL) has released its FY08 result — it made an $8.8m loss and has $47m in cash. SDL up 0.5c to 24.5c.
  • Citi have cut their recommendation on both Woodside Petroleum (WPL) and Oil Search (OSH) to HOLD from BUY and Arrow Energy’s (AOE) target price after cutting their oil price assumptions, but reiterates, “We continue to consider that the secular bull market for commodities is intact”. WPL down 105c to 5479c and OSH up 4c to 577c.
  • JP Morgan has tipped the Commonwealth Bank (CBA) and Westpac (WBC) are the two likely to buy Macquarie Group’s (MQG) Australian margin lending business. They maintain their OVERWEIGHT recommendation and upped their target price to 7719c from 7219c. MQG up 32c today to 3863c, more than 100% below JP Morgan’s target price.
  • Deutsche Bank cut their target price on Leighton Holdings (LEI) to 5150c from 5425c despite maintaining their Buy recommendation saying, “Recent state government announcements of growing deficits and delayed mining capex due to funding uncertainties suggest a cautionary approach. LEI down 4% to 4089c.
  • Fortescue Metals (FMG) has signed an agreement with Australian Renewable Fuels and has provided an Operations Update this morning. FMG up 2c to 600c.
  • Paladin Energy (PDN) has made corrections to its Langer Heinrich Mining Reserve Estimates. PDN down 1c to 428c.
  • Babcock & Brown Wind Partners (BBW) — Children’s Investment Fund stake in the company is now at 11.03%. BBW down 1c to 119c.
  • Bendigo and Adelaide Bank (BEN) has provided a transfer of business update. BEN down 11c to 1170c.
  • Moly Mines (MOL) has announced the completion of their US$150m interim financing arrangement. MOL down 5c to 139.5c.
  • Australian Property Group (ALZ) announced they have undertaken a business review with its parent and have decided to put their industrial and logistics plans in Asia on hold. ALZ up 1c to 59.5c.
  • The Dow Futures are suggesting a 26 point rise on Wall Street tonight.

MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.

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