The market is flying today — up 213 or 5.1% at midday — on the back of Wall Street’s record breaking bounce overnight. The SFE futures predicted a 306 point gain in the market this morning. The banks are regaining some of their recent heavy losses. Resources pumping. Fortescue up 48%. Industrials up 5.3%. Property up 5.2%.

The Dow was up 936. Up all session. Closed on surging highs. Main Point: S&P 500 has its largest one-day-percentage-point-bounce since 1938. Dow up the most ever and had its largest percentage gain since 1933. An eight-session losing streak broken. Everything (almost) up. The US and Europe have coordinated to provide US dollar funding in unlimited amounts via the international swap lines to provide liquidity to the world’s major commercial banks. The Euro countries and the US will also guarantee debt and interbank lending between financial firms, make direct capital infusions to their balance sheets and take major equity stakes in part nationalization of several big banks. Commodities were up, oil up, gold down and bonds closed for a holiday. Financials up 10.2%. Industrials up 7.2%. Resources flew. The CRB commodities Index up 3.0%. US dollar flat against the Euro. Aussie dollar up 3.92% against the US dollar. Morgan Stanley up 93% as it completed the US$9bn deal with Mitsubishi UFJ Financial as they took a 21% stake in MS.

  • Both BHP and RIO up significantly in ADR form overnight, 18% and 19% respectively. Both up 9% and 15.3% in the UK. BHP closed at the equivalent of 3141c in the US against a close of 3000c here.
  • Metals all well up overnight – Copper up 6.67%, Nickel up 5.06% and Zinc up 1.55%. Aluminium up 1.39%.
  • Oil price up $3.73 or 4.8% to $81.17 on the back of the market rallying after the governments said they would come to the banks aid.
  • Gold down $16.50 to $842.50
  • US Bond market closed for Columbus Day holiday.
  • Wesfarmers (WES) assured the market it will be able to refinance a number of debt facilities by the end of 2009 despite the credit crunch. Its biannual briefing revealed soft sales at Coles – 1Q sales up 2.6% and comparable sales up only 1.3% – down from 2.4% last quarter. As the briefing continues, details on WES’s coal hedging program will be in the spot-light with the A$ having fallen rapidly recently. WES up 6.69% to 2264c.

GSJB Were has downgraded oil and gas stocks after revising down its oil price forecasts. It cut its 4Q08 oil price expectations to US$85 a barrel from US$120 a barrel, 2009 forecast cut to US$75 from $US100. They cut Woodside to Hold from Buy and their target price to 4774c from 7350c, Oil Search to Hold from Buy and target price to 459c from 735c. They also lowered their target prices for both Origin Energy and AGL Energy.

Making the news today…

  • JP Morgan expects the cost of funding for Aussie banks to fall making another 1% cut in interest rates by the RBA unlikely. Bond market is pricing in a 51% chance of a 25bps cut – 56% yesterday, but JP Morgan expects 150bps in the next 8 months.
  • Pan Australia (PNA) announced it will supply China’s largest copper smelting firm with concentrate from its Phu Kham mine in Laos under an initial 4 year contract.
  • GSJB Were says Fortescue Metals (FMG) is well placed after yesterdays market update. The stock is flying. They believe the company could use current finances and projected cash flow to fund planned expansion, but if conditions deteriorate, they might struggle. They say BUY with a 740c target price.
  • Leighton Holdings (LEI) announced it has been awarded a 5 year contract worth $1bn to operate and develop two coal mines for Bayan Resources in Indonesia.
  • Boart Longyear (BLY) has been cut to Underperform from Neutral by Merrill Lynch on concerns about the near-term outlook for drilling services. They also cut their target price significantly to 76c from 164c. Citi also cut their target price to 80c from 185c but upped their recommendation to Hold from Sell saying there is value to be had.
  • Challenger Infrastructure Fund (CIF) has hedged around 70% if its net asset value against currency movements.
  • Linc Energy (LNC) CEO Peter Bond says the company is aiming to finalize a $1.5bn deal with China’s Xinwen Mining Group by the end of the week to sell some QLD state coal tenements.
  • JB Hi-Fi (JBH) has reiterated its sales forecast for the year saying it expects sales to increase by 28% to around $2.35bn. Its CEO Richard Uechtritz said he remains confident despite the current economic and retail environment. JBH up 3.6% in the previous quarter compared to the 10.1% fall in the overall market.
  • Deutsche Bank has labeled Western Areas (WSA) quarterly result yesterday as slightly disappointing, and that its aggressive growth strategy may be in jeopardy because of the plummeting nickel price. They maintain their HOLD recommendation and 800c target price.
  • Valad Property (VPG) has had its target price cut to 21c from 68c by GSJB Were noting a “strong lack of confidence in earnings visibility, the canceling of the dividend is even more troublesome”.
  • UXC Ltd (UXC) has won further contracts for environmental programs worth up to $75m.
  • GrainCorp (GNC) has launched Harvest 08 Wheat, Barley and Canola pools.
  • Molopo (MPO) has jumped on the back of its quarterly production report.
  • The Dow Futures suggest the recent bounce might continue – they suggest a 210 bounce on Wall Street tonight.

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