Not a good start to the week – down 46 or 1.2% – was down earlier more than double the 37 point fall the SFE Futures suggested this morning. We are following Wall Street’s poor show on Friday with all sectors down. Financials underperforming. Resources outperforming – Both BHP and RIO are both up 3% and 3.9% after being down earlier in the session. A further 140 companies in the All Ords have hit a fresh yearly low today.

The Dow closed down 312. Down all session. Down 504 at worst. Volatile session – trading was halted on the open to slow pace of selling as futures suggested a 1000 point fall. Negative 3Q results and a profit warning from Sony in Japan (Japan down 7.5%) and dour guidance from Microsoft hit Asian, European and the US indices. There was little improvement in the interbank lending spreads which even got worse during the session on concerns about the health of the global economy. Oil down despite OPEC cutting production, gold up, bonds down slightly and metals down (but nickel up 7%). US dollar up 1.3% against the index of currencies to a two-year high. A$ down a massive 6.92% against the US dollar. Commodities down – resources down – energy stocks hit Chevron down 4.28%. Xstrata down 7.44%, Freeport McMoRan down 5.4%. Anglo up 0.56%.

  • BHP down 0.9% and RIO up 2.5% in ADR form on Friday – both up in the UK.
  • Metals mostly down with Nickel the stand out closing up 7.12%. Copper down 6.9%, (down 35% so far this month alone) Zinc down 2.83% and Aluminium down 1.84%.
  • Oil price down $3.83 to $63.34 despite talk that OPEC may entertain another production cut.
  • Gold up $15.60 to $730.30
  • US Bonds down with the 10 year yield up to 3.68%.

Event of the Week – FOMC 2 Day Meeting – We will wake up to the decision on Thursday morning. 50% chance of a 50bp cut to 1.0% and 31% chance of a 75bp cut to 0.75%…lowest rate ever. They are running out of bullets.

Making the news today…

  • Goodman Group (GMG) remains in a trading halt after the AFR reported that it was looking to raise up to $700m by selling new shares at $1 each.
  • Consolidated Media Holdings (CMJ) confirmed speculation by announcing that both James Packer and John Alexander have stood down from PBL Media board and that it won’t be injecting any further capital into PBL Media.
  • According to The Australian Media and Marketing section, Photon Group held talks with a private equity group and has been in negotiations with a number of banks over a possible privatization deal. Its stock has been smashed in the past year – it closed on Friday 10c lower at 160c, down from 700c a year ago.
  • Qantas (QAN) has changed its dividend reinvestment plan terms and conditions.
  • AGL Energy (AGK), Sunshine Gas (SHL) and Queensland Gas (QGC) all remain in a trading halt. Talk is that BG Group will offer around 545c a share for the 90% of QGC is doesn’t own. The news has also supported Santos’ (STO) share price – outperforming this morning.
  • Western Areas (WSA) has announced excellent production and drilling results at Flying Fox.
  • BHP Billiton (BHP) says underlying demand for liquefied natural gas is set to remain strong but there will be volatility in the near term.
  • Kagara (KZL) is going to carry out a review of its spending and operations on the back of heavy falls in metal prices.
  • Platinum Australia (PLA) announced its first ore feed into the Smokey Hills processing plant.
  • Mount Gibson Iron (MGX) is in ongoing discussions to sell its iron ore and has requested its shares remain suspended.
  • Macquarie Infrastructure Group (MIG) released traffic numbers.
  • Sino Gold Mining (SGX) announces that it has poured the first gold at its White Mountain gold mine in China.

Broker Stuff today…

  • Panoramic Resources (PAN) has been cut to Underperform from Buy by Merrill Lynch due to falling nickel prices. Nickel price forecasts were cut to US$6 per pound for 2009. Despite the stock looking cheap, they see no short term catalyst “other than a corporate bid” which isn’t likely to come unless clarity on credit emerges. They also cut their target price by 80% to 100c from 500c.
  • UBS Warburg cut their target price on Sims Group (SGM) to 1650c from 2200c despite maintaining their Neutral recommendation after its profit result last week. They remain cautious and see no short term reason to buy the stock.
  • Macquarie Equities upped their recommendation on National Australia Bank (NAB) to Neutral and maintain their 2750c target price. They were encouraged by the solid underlying earnings performance and expect the share price to reflect their view in the next 12 months.

The Dow Futures suggest a 119 point rise on Wall Street.

In today’s edition of the newsletter, we have an article “Blowing Bubbles” igniting the debate – Do bubbles ever re-inflate?

MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.

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