Our market has made up nearly all of yesterday losses — up 135 or 2.9% — up 166 at best. Resources outperforming after heavy falls yesterday, Both BHP and RIO are up 5% and 6%. Financials are up 3% across the board with Westpac Bank outperforming its peers — up 6%, its takeover target St George is also up 4.3%. Macquarie Group down 50c despite the market rocketing along.

The Dow was up 485 as the US markets experienced some bargain hunting, short-covering, and hopefulness about the likely passing of some Stabilisation Bill through Congress by week-end. Oil up 5%. Gold down $13.60. Bonds down.

The S&P had its biggest jump in six years — after having had its worst fall in 21-years yesterday. Financials outperformed — up 13.1%. JP Morgan, Citigroup and Bank of America all up over 13%. The Energy sector did the second best — up 5.8% – on the thought that if the Stabilisation package goes ahead then the US and global slowdown might not be as acute and the crunch on oil-demand not as bad. Commodities up 0.7% overall. Utilities underperformed — only up 1.3%.

The credit markets are still acutely frozen — interbank lending rates (Libor) spiked 431 basis points to 6.88% — the rate increased across all terms from overnight to 12-months. The Fed made another aggressive intervention in the US money markets increasing liquidity by $20bn by buying REPOs. The SEC and the FASB are apparently going to issue guidance on how to value assets in times of “inactive” markets based on a modeled value rather than a “mark-to-market” basis — this would have the effect of decreasing the rapidity of write downs and assist in stopping the spiraling and vicious fire-sale cycle.

Chicago’s Manufacturing Index fell 1.2 to an expansion rate of 56.7 — better than the 53.0 expected. July’s metro home prices fell another 0.9% from June — down 16.3% on July last year. That’s the 25th successive month of falling home prices in major cities.

  • Both BHP and RIO up overnight in ADR form, 2.95% and 10.15% respectively.
  • Metals all down overnight — Nickel down 3.5%, Copper down 1.11% and Zinc down 0.66%. Aluminium down 0.63%.
  • Oil price up $4.41 to $100.70 on the belief that Congress will come up with some type of bailout plan and bargain hunters stepping in after big drop.
  • Gold down $13.60 to $880.80
  • US Bonds down with the 10 year yield up to 3.83% from 3.58%

A few broker downgrades this morning for Harvey Norman (HVN) after it announced yesterdays profit update. Citi have cut its target price to 400c from 420c and say they expect HVN shares to remain volatile over the next six months given the weak retail sales. They maintain their BUY recommendation. ABN AMRO cut their target price to 297c from 338c and maintains their HOLD recommendation. HVN down 3.2%.

ABN AMRO say the National Australia Bank’s (NAB) decision to hedge its synthetic CDO portfolio will eliminate some uncertainty around the stock which should do its share price no harm. NAB up 49c to 2475c. The NAB remains their preferred stock in the sector and maintains their HOLD recommendation. They expect the total cost of synthetic CDO hedging will be around $570m$660m before tax over the next few years.

Also making the news today…

  • The ANZ Bank (ANZ) has raised $1.081bn in Tier 1 capital. It is now the forth Aussie bank to raise this type of capital for retail investors to jump on board. NAB is expected to announce a Tier 1 issue after its annual results on Oct. ANZ up 10c to 1885c.
  • Nexus Energy (NXS) announces it will accept Roc Oil’s (ROC) takeover offer for Anzon Australia (AZA) in relation to its 19.2% holding in the company. ROC offered back in June 0.792 of its shares plus 5c for each AZA share, implying a value of $327m. NXS up 10% on the news.
  • PaperlinX (PPX) said it plans to raise up to $300m through a non-renounceable share entitlement offer. Funds raised will be used to pay down debt, including a $150m reduction in PPC’s multi-currency facility that was previously promised by the company. The stock is in a trading halt and last traded at 175c.
  • Admiralty Resources (ADY) has requested a suspension from official quotation. It last traded at 5.2c. It has advised that it is negotiation with the receivers of Hawkswood Investments regarding an extension of time to repay the loan from Hawkswood that was due for repayment on 30 September.
  • Orica (ORI) has announced a JV with Southwest Energy to operate an explosives business in the US. It will have a half stake in the business for an initial consideration of US$32m, comprising contributed businesses and cash. ORI up 2.67% this morning.
  • Deep Yellow (DYL) has provided an exploration update for its Australian operations. DYL up 2.27% to 22.5c.
  • UXC Ltd (UXC) announces it has secured two major contracts worth up to $75m in the carbon and environmental sector. UXC up 2.5c to 96c.
  • Silex Systems (SLX) up 14% to 400c on bargain hunters stepping in — a major shareholder also upped its stake.
  • JP Morgan has upped their recommendation on Westpac Bank (WBC) to Neutral from Underweight despite cutting their target price to 2129c from 2220c. They say the recent share price underperformance “restores justifiable peer relative value”.
  • Billabong (BBG) has completed the acquisition of broadsports accessories brand DaKine. BBG up 13c to 1383c.
  • Pharmaxis (PXS) files first marketing application for Bronchitol in Australia. PXS down 11c to 214c.
  • The Dow Futures are suggesting a 55 point fall on Wall Street tonight.

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