The market is having another down day — 80 points or 1.8% lower — despite a Global Coordinated interest rate cut overnight. US cut rates 0.5% to 2.0% with similar cuts from the European Central Bank, Bank of England, The Bank of Canada, the Swedish Riksbank and the Swiss National Bank. Japan offered support but held back on cutting rates … poor buggers don’t have much room to move with interest rates at 0.5% already. Obvious disappointment that the cuts didn’t lift the markets. Treasury Secretary Henry Paulson’s comments didn’t help — US market was up until his comments that some companies will still fail. Over 100 stocks in the All Ords yesterday hit a fresh yearly low.
The Dow Jones closed down 189 – Up 181 at best. Down 253 at worst. The Fed and five European central banks made a coordinated emergency 50bp rates cut in an attempt to stabilize the global financial markets. Wasn’t convincing. Europe announced a 550bn pound stabilization package. China cut its central key lending rate for the second time in two weeks. The US market tanked at the end of the session on comments from Treasury Secretary Henry Paulson that some institutions would still fail (scaring credit markets). Financials down. Resources outperformed. Metals down. Oil down, bonds down and gold up.
- The SFE Futures suggest a 12 point fall in the market.
- Both BHP and RIO down in ADR form overnight, 0.67% and 2.17% respectively.
- Metals all down – Copper down 7.64%, Nickel down 7.31% and Zinc 8.12%. Aluminium down 1.83%.
- Oil price down $1.24 to $88.94 after the Energy Information Administration said US inventories increased by 8.1m barrels last week.
- Gold up $24.50 to $906.50
- Bonds down with the 10 year yield up to 3.65%.
The RBA has announced the largest open market operations deficit ever — $5.17bn. The RBA has also increased the term for repo collateral out to 364 days to support counterparties with longer-term funding. Will also loosen restrictions on accepting RMBS in market operations. The RBA is trying to increase liquidity amidst the rapidly deteriorating global financial markets.
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Dog of the Day — The Aussie Dollar — hit a 5 year low of 64.39c overnight. The only currency coming close to us in terms of poor performance is the Brazilian Real. The general comment is that the selling is way overdone and possibly driven by some specific funds in distress. In which case we are set for a bounce. We have a separate page explaining the fall in the A$ and the affected stocks on the MARCUS TODAY website this morning. The A$ is down 31% since the US$ started going up on July 15. It is the worst performing currency closely followed by the Brazilian Real.
Bank of Queensland (BOQ) released FY08 results — nothing out of the ordinary — not inspiring but no hidden bad news. Net profit down 2% to $126.8m from $129.8m a year ago. Net interest margin at 1.67% for the year — down from 1.81% and likely to stay under pressure. The all important cash profit was up 46% to a normalized record of $155.4m. Cash earnings up 11% ahead of the group’s own guidance of 10%. Up 14c to 1164c.
- Mount Gibson (MGX) getting smashed — down 25.5% to 86c — after some of its customers asked to delay iron ore shipments due in Q2 2009. Not a good sign for other iron ore stocks and raises the prospects of iron ore price cuts at the next annual negotiations.
- Nexus (NXS) continues to fall — down 21% to 60.5c — after announcing earlier in the week that Japan’s Mitsui pulled out of an agreed investment in the Crux liquids.
- Lend Lease (LLC) has announced it chief operating officer Ross Taylor will be stepping down from his role and will not be in contention for the CEO position. He will remain with LLC before pursuing other corporate opportunities. LLC down 3.47% to 862c.
- Brambles (BXB) doing well today after announcing it has reached an agreement with Wal Mart after being in negotiations for 6 months over the use of CHEP pallets. BXB up 19c to 754c.
- CFS Retail Property Trust (CFX) has successfully completed its $325m institutional placement and said it is well placed to snap up shopping centers that are put up for sale by struggling rivals. CFX down 7.9% to 221c.
- Gloucester Coal (GCL) says it has no idea why its stock has been canned lately. Down another 10.7% to 402c.
- Valad Property Group (VPG) down 40% to 15c after revealing it has a $31.1m exposure to troubled property developer Petrac.
- Industrea (IDL) secures a new $25m contract and confirms FY09 guidance. IDL up 16.6% to 24.5c.
- Independence Group (IGO) says drilling has commenced at Moorarie. IGO down 3.57% to 175.5c.
- Great Southern Ltd (GTP) has announced a restructure programme to create Australia’s largest hardwood plantation business. GTP down 1c to 52c.
- New Zealand based The Warehouse group has abandoned its grocery market plans so it could overcome competition issues and once again become a takeover target for both Woolworths and Foodstuffs. WOW down 38c to 2722c.
- Credit Suisse maintain their OUTPERFORM recommendation on Incitec Pivot (IPL) but cut their target price to 900c from 1075c saying, saying it is a well managed company and “based on fundamentals, IPL has clearly been oversold.”
- Merrill Lynch tells us to BUY Austar (AUN) after lifting their recommendation from Hold and their target price to 140c from 135c. They believe the stock will continue to outperform its more cyclical exposed peers.
The next event for the market will be this weekend. Paulson is seeking a special meeting of the Group of 20 countries, including the world’s richest industrial countries and major developing countries, to discuss methods to deal with the global credit crisis. The meeting is expected to take place on Saturday in Washington. The Group of Seven major industrial countries, the 185-nation International Monetary Fund and the World Bank will also meet this weekend. What they put together holds the key. Can they convince the markets that it is safe?
This coming Monday, 13 October, 2008 is a national holiday in Canada and in the United States. It’s Thanksgiving in Canada and Columbus Day in the U.S. So this weekend is going to be a long one in more ways than one.
MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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