The market has lost most of yesterday’s gains – down 94 or 2.2% – on the back of the Wall Street down overnight again. The SFE Futures suggested a 120 point fall this morning. Property Trusts and Resources both underperforming – Healthcare outperforming relatively. BHP Billiton down 5% on back of its less than inspiring 1Q production numbers and is responsible for wiping 22 points off the index on its own.
The Dow Jones closed down 231. Failed to reach positive territory all session – volatile – fell 230 points in the last hour. Lower-than-expected earnings results and less than promising guidance from big names did most of the damage. The Fed’s decision to spend $540bn to buy assets directly from money market mutual funds to shore-up the commercial paper markets did nothing to inspire a rally. Inflation hedge investments, oil and commodities were sold off in favour of US Treasuries. The US dollar was up against a basket of currencies. Gold and Oil struggled. The Libor – measure of confidence and the rate at which banks lend money to each other over various terms – has further decreased, meaning the credit markets are beginning to flow again. The 3-month term fell another 23bps to 4.06%.
Financials were down 1.8% – American Express was up 8.38% on better-than-expected earnings. Goldmans added Citigroup to their conviction sell list – Citigroup fell 6.3%. The materials sector was down 5.7% – Freeport McMoRan down 11% on poor earnings. The tech sector was down 5.6% on the back of Texas Instruments’ 6.3% fall and earnings results missing consensus. Sun Microsystems issued an earnings warning.
Earnings results have been mixed and outlooks cautious – only 3% of outlooks have been positive, 21% mixed, 30% in-line with previous expectations and 45% have been negative.
- Both BHP and RIO down over 5% in ADR form overnight, 5.43% and 6.39%.
- Metals mostly down overnight – Copper down 5.5%, Zinc down 2.6% and Aluminium down 2.5%. Nickel up 1.65%.
- Oil price down $2.85 to $71.29 on the back of the US dollar gaining against the Euro. Oil is now down 52% from its all-time high peak of $147.27 reached on July 11.
- Gold down $22 to $768.
- US Bond up with the 10 year yield down to 3.72%.
Treasurer Wayne Swan said the Australian government said it will alter its $700bn guarantee on bank deposits on the back of increase in redemptions threatening cash trusts and mortgage funds. He will be looking at making requirements for holders with “somewhere north” of $1m in accounts to pay an insurance-style premium for the taxpayer-backed guarantee.
BHP Billiton 1Q production numbers are out. Described as average – slightly below what analysts expected. Unlikely to provide a short term share price catalyst. It did warn that China is not immune to a global economic slowdown and that short term volatility will continue, but its long term growth prospects remain in tact. Rio continues to trade below BHP’s 3.4-for-1 takeover offer.
Making the news today…
- Macquarie Group (MQG) has made changes to its corporate governance. Security holders of Macquarie satellites – Macquarie Airports (MAP), Macquarie Communications Infrastructure Group (MCG) and Macquarie Infrastructure Group (MIG) – will have the right to nominate and vote on the appointment of all directors.
- ANZ Bank (ANZ) has appointed Nigel Denby as its Chief Risk Officer for Asia Pacific as it steps attempts to make its presence felt in the region.
- AXA Asia Pacific Holdings (AXA) has announced sales and inflows have come under pressure in the 3Q.
- Sino Gold (SGX) announced gold production increased to 38,250 ounces from 35,412 ounces in the 2Q.
- Riversdale Mining (RIV) has released its 1QFY09 production result – numbers look OK at its main project in Mozambique. RIV currently has $345.5m of cash on hand or $1.85 a share.
- MacArthur Coal (MMC) released its 1QFY09 production report – figures came out in line with expectations and reiterated its profit guidance for the 1H of 2009 for $150m-$160m.
- JB Hi-Fi (JBH) says it confident of meeting markets expectations in FY09, “subject to the economic environment not deteriorating further”.
- Oakton (OKN) said at its AGM that its outlook was less predictable due to market volatility and the credit crisis. It failed to give guidance for FY09.
- Spark Infrastructure Group (SKI) has told investors they will focus on organic growth in 2008 and is likely to benefit from interest rate cuts.
Broker stuff today…
- National Australia Bank received plenty of broker attention this morning after its FY profit result yesterday. JP Morgan upped its target price to 2535c from 2189c despite maintaining their Underweight recommendation warning incoming CEO Cameron Clyne might increase provisions to clear the decks. ABN AMRO see things differently – they cut their target price to 2430c from 2495c and maintain their NEUTRAL recommendation saying it is the least favoured play in the sector.
- Woolworths (WOW) released impressive 1Q sales yesterday – Credit Suisse upped their target price to 3140cfrom 2820c and maintain their NEUTRAL recommendation saying Australian food & liquor remains the “engine room of performance”.
- JP Morgan maintain their NEUTRAL recommendation on Fortescue Metals (FMG) despite cutting its iron ore forecasts – it now expects three straight 10% price falls from April 2009 to April 2011.
- Deutsche Bank cut Pacific Brands (PBG) target price to 205c from 270c and maintain their HOLD recommendation after its AGM yesterday. They say the downgrade in earnings guidance was not a complete surprise.
Australia’s 3Q CPI figure has come in stronger than expected – headline CPI at 1.2% compared to 1.5% in the previous quarter and the 1% economists expected. Likely to give the A$ a boost. RBA can’t keep cutting rates if inflation continues to create headaches.
The Dow Futures are suggesting a 22 point rise on Wall Street tonight at midday.
MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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