The market is down 58 – at its low – despite being up 55 early in the session. Both resources and financial struggling and property trusts are underperforming. Ninety-two stocks in the All-Ords have hit a fresh 52 year low – most of them repeat offenders – Bradken, Bluescope Steel, Caltex, Fairfax Media, Leighton Holdings, Lend Lease and Panoramic Resources to name a few.
Dow up 172 – Up 276 at best and down 276 worst. Rallied 450 odd points in the last 1½ hours. Even CNBC said the market was “whacko” this morning. The Dow’s low point was the lowest level since April 2003. Stocks initially fell on economic data showing home foreclosures rose to their highest levels since the credit crisis began. Negative housing data including falling house prices, compounded by higher initial jobless claims led to early falls. Very volatile trading session. Oil was up 37c – the energy sector was up 6.5% on hopes OPEC will cut production. The Housing sector was walloped – down 18% to a 7-year low. House stocks down in the UK too. Company results were mixed although a few big names including Microsoft beat expectations, giving a lift to the market in the last hour of trade. Commodities were mixed, US treasuries were down, and the A$ was down against the US dollar.
According to the AFR, the European Commission may hold up the BHP bid for RIO with a recommendation that BHP Billiton sell some of Rio Tinto’s iron ore assets or those of Rio Tinto. It also said that BHP is expected to receive a confidential “statement of objections” from the EC by early next month. BHP CEO Marius Kloppers said BHP would consider making smaller acquisitions – “One would want to maintain the balance sheet, but we couldn’t rule out smaller things” – as they wait for the green light from regulators. BHP received conditional backing from South African regulators. RIO fell 15% yesterday. BHP 8.6%.
Treasurer Wayne Swan is expected to unveil details of a bank guarantee fee structure once the market closes today after his meeting with the big 4 – Westpac (WBC), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and ANZ Banking Group (ANZ) – in Canberra. He has been under the pump recently after the likes of Perpetual, Axa-Asia Pacific, Australian Unity and Challenger suspending redemptions.
- BHP down 2.82% in ADR form overnight, RIO up 0.36%.
- Metals mixed overnight – Zinc up 5.6% and Aluminium up 0.6%. Nickel down 6.5% and Copper down 2.33%.
- Oil price up 25c to $61.17 on anticipation OPEC will cut production at its emergency meeting.
- Gold down $20.50 to $714.70
- US Bonds down with the 10 year yield up to 3.64%.
Making the news today…
- Both Queensland Gas (QGC) and AGL Energy (AGK) are in a trading halt – apparently they are in talks regarding a potential material transaction. AGK owns a 27.5% stake in QGC.
- Perpetual (PPT) – down after yesterday’s announcement that it would suspend redemptions from certain funds after the government’s bank deposit guarantee lead to a heap of withdrawal requests.
- Sims Metal Management (SGM) announced an unaudited 1Q profit of $145.1m, up 175% on the back of acquisitions but warned that metals trading remained extremely difficult with volumes and margins to be significantly affected in the 2Q. It didn’t provide FY guidance but said it would provide guidance for 1H at its AGM on November 21.
- Arrow Energy (AOE) has received approval to develop its fifth coal seam gas project in Australia.
- Murchison Metals (MMX) says it has no idea why its share price was up 38% yesterday.
- Boral (BLD) expects FY profit to come in lower than last year at around $200m. Analysts’ are expecting its profit to fall by around 9% to $220m.
- PanAust (PNA) announced it would review budgets and implementation schedules for all growth projects and exploration due to the difficult market conditions. It wasn’t long ago that GSJB Were had a Buy recommendation and 140c target price.
- Property Trusts struggling again led by Westfield (WDC) down 4.1% to 1419c early on and Stockland Group (SGP) down 5.6% to 408c on concerns of further capital raising. GPT Group (GPT) is seeking to raise $1.9bn in 1 for 1 entitlement offer to reduce debt.
- Allco Finance Group (AFG) continues to reiterate that it is meeting its interest payments contrary to recent media reports.
- Qantas (QAN) has created two new roles have been created for existing executives. Its head of human resources will leave the company.
Broker stuff today…
- Newcrest Mining (NCM) was upped by UBS Warburg to Buy from Neutral but had its target price cut to 2560c from 2860c. They like the fact that the balance sheet finally has no debt on it that required refinancing in 2010 and that “cash flow clearly remains positive by some margin”. NCM is down 33.3% in the past month.
- ABN AMRO is the only major broker with a recommendation on BHP Billiton (BHP) post its quarterly production numbers as it is not advising them on the Rio Tinto deal. Despite maintaining their Buy recommendation they cut their target price by around 20% to 3966c from 5034c.
- Credit Suisse cut their recommendation on Seek (SEK) to Underperform from Neutral and their target price to 490c from 580c after ad volumes were down in 1% from last year in September.
- GSJB Were cut its earnings expectations on the gaming sector after their economics department predicted a recession for the Australian economy. The sector has fallen along with the market despite its defensive characteristics with Tattersall’s (TTS) being the exception, “having outperformed due to its greater earnings certainty and less cyclical exposure.” They maintain their HOLD recommendation on Tattersall’s (TTS), TABCORP Holdings (TAH), Aristocrat Leisure (ALL) and Crown (CWN).
For more go to our broker archive for over 2,000 historic broker recommendations and look up your favourite stock. We show the price at the time of the recommendation and the performance since. Go to “Broker Stuff” on the website and hit the archive link at the top of the page.
- The Dow Futures are suggesting a 53 point fall on Wall Street tonight at midday.
- ABN AMRO says with the RBA having already cut rates since September and with direct flow on to mortgages thanks to bank funding strains easing, we shouldn’t keep expecting the RBA to ease monetary policy further.
MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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