The market has had another weak response to the second-ever-biggest-point rise on Wall St overnight – only up 161 or 4.2% at 11:30am. Much less than the 242 point rise predicted by the SFE Futures this morning. On the 13th of October, after the biggest-point-rally-ever in the US, the Aussie market similarly rose only 3.7% – much like today so far. Some are suggesting we might have hit the bottom; others are calling it a ‘great selling day’. Every sector is up, resources and financials outperforming – just like the last time.

The Dow Jones was up 889 or 10.88% – despite very negative consumer confidence and housing data. It was up all session – hovered up about 200 points most of the day until a 700 odd point run in the last 2 hours. Everyone piled into equities on little more than a change of sentiment with no obvious catalyst other than a belief that stocks have been oversold and are undervalued. The US followed big rallies in Asia and Europe. US dollar up. A$ up against the US dollar and the Yen. Bonds down with a rotation into equities (reversing the flight to quality). Gold down a touch. Oil up.

Financials up 13% – biggest one day rise since September. Under the Troubled Asset Relief Program (TARP) Treasury is continuing to buy equity stakes in the banks as a method of injecting capital into the struggling financial system – 9 of the biggest banks may receive $125bn from the $700bn stabilization package as soon as this week. Energy up 11.9% – oil up 1.31%. Some better-than-expected 3Q results from Occidental Petroleum and Valero energy – both up 18% and 12.24%. Exxon Mobil up 13%, Chevron up 13%. Resources (materials) up 12.6%. Industrials up 10% – Boeing up 15.3% and General Motors up 15% on a potential government bailout fund being set up for the auto-making industry. Retailers up 13.6% – Target up 12% and Wal-Mart up 11%.

  • Both BHP and RIO up in ADR form overnight, 14.7% and 13.7% respectively.
  • Metals mostly up overnight – Nickel up 7.8% Aluminium up 3.63% and Copper up 2.66%. Zinc down 2.78%.
  • Oil price up 81c to $62.83 to after the government announced higher than expected crude inventory.
  • Gold down $2.40 to $740.50.
  • Bonds down with the 10 year yield up to 3.85%.

St George Bank (SGB) has released its FY result. Main points: Cash profit up 13.9% to $1.32bn – ahead of guidance and in line with the $1.3bn analysts’ expected on average. (GSJB Were expected $1.306bn) 2H cash profit up 27%. Revenue up 9.4% to $3.579bn and costs down 0.3% to $1.386bn compared to the $1.44bn GSJB Were expected. Net profit increased to $1.17bn.

In the news today…

  • Macquarie Media Group (MMG) are evaluating their capital structure and reviewing a partial prepayment of debt against other capital management initiatives and acquisitions.
  • Minara Resources (MRE) doing well after announcing it plans to raise $210m via a rights issue.
  • Bendigo and Adelaide Bank (BEN) plans to raise around $75m by issuing convertible preference shares. The shares will be offered on November 6 and be converted to ordinary BEN shares on December 16.
  • Fairfax Media (FXJ) has extended the debt maturity of a $422.5m syndicated bank facility to April 2013 from April 2010.
  • Australian Infrastructure Fund (AIX) has responded to a ASX share price query.
  • According to the AFR, Goodman Group (GMG) has raised its underwritten capital raising by $200m to $955m after strong demand from institutional investors.
  • Gloucester Coal (GCL) said it expects to announce a record FY profit and that demand for its coal remains strong. Its CEO also said it is well placed to weather the financial storm.
  • Insurance Australia Group (IAG) announces Andy Cornish is the new CEO of its Australian Direct Insurance.
  • UBS Warburg says BHP Billiton told analysts on a site visit that it isn’t experiencing any falls in iron ore demand despite reports that China’s steel production is slowing.

Broker Stuff today…

  • Aristocrat (ALL) getting hammered – down 25% to 413c – after announcing a profit warning after close of market yesterday. Macquarie Equities maintain their Underperform recommendation saying the “stock is vulnerable with credibility savaged and no CEO” and have a 360c target price. JP Morgan cut its target price to 475c from 590c but maintains their Neutral recommendation.
  • GSJB Were maintain their Hold recommendation on WorleyParsons (WOR) and 3049c highlighting although management said FY09 was looking good, they failed to make any specific outlook comments on FY10, “the period in which project deferrals are likely to have the greatest impact on earnings.”
  • JP Morgan have cut their target price on Foster’s Group (FGL) to 560c from 580c after incorporating an economic recession in Australia, UK, Europe and the US into their earnings expectations. They say Hold but expect a significant hit on revenue and margins.
  • Lihir Gold (LGL) has had its target price cut to 300c from 370c on the back of higher costs and lower earnings forecasts. Although 3Q08 production came in 12% above their estimates, cash costs were also up 6%. They maintain their Buy recommendation.

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