The market is struggling for a second consecutive day — down 178 or 4.3% — in line with the 180 point drop the SFE Future predicted this morning. Resources and Property Trusts doing most of the damage led down by BHP, RIO and FMG. Stocks to hit fresh yearly lows include Asciano Group, Aristocrat Leisure, Clive Peters, Fortescue Metals, McPherson’s, News Corp, Photon Group and Reece Australia.
The Dow Jones had another poor session — down 443 bringing its decline for the last two sessions to 929 – down all session – closed on low. Economic data remains negative — Initial jobless claims in-line at 481,000 but the four-week moving average remains at recessionary levels – at 477,000. Retail index plummeted on an unexpected decline in sales at US chain stores in October. Private Equity group Blackstone Group closed down 12% after posting its biggest 3Q loss in 18-months and News Corp down 16% following a 9% fall yesterday on a decrease in sales in the 3Q. The NASDAQ fell 4.34%.
News in Australia this morning…
ABC Learning collapse — Commonwealth Bank of Australia (CBA) announced it has senior debt exposure of around $240m to the company. It also holds $4.456m in ABC Learning hybrid notes. The exposed banks appointed McGrathNicol as receivers and managers yesterday. The ANZ Bank ($182m), Westpac Bank ($200m) and the NAB ($140m) announced their exposures yesterday.
- ResMed Inc (RMD) announced a 1Q net profit of $US28m. Interestingly enough, management said it is yet to see any material impact from the global economic downturn on sales.
- Babcock & Brown Power (BBP) at its AGM said it’s operating within its debt covenants. Reiterated EBITDA for the year to June 30 2009 is likely to be $350-$360m with the outlook for the industry and firm’s earnings remaining sound.
- Beach Petroleum (BPT) said the Egyptian government approved its participation in projects in the Gulf of Suez.
- Crown (CWN) down 2.7% — Talk is that the Las Vegas Sands casino may have gone bust and said it is defaulting on loans. They have $8.8bn in long term debt. CWN is down 5.2% this month.
- Telstra (TLS) well supported today on the back of its Investor Briefing yesterday — just about all of the broker research this morning was positive. Its defensive characteristics are a good quality to have in this market.
- Rio Tinto (RIO) — Moody’s Investors Service revised the rating outlook for the Rio Tinto Group rated companies to “developing” from “positive”.
- Redflex Holdings (RDF) has announced a US$32m 5-year services contract with the City of Chicago.
- ING Office Fund (IOF) reiterated distributions of 10.8c per unit for the year and said it is well placed to operate in this difficult environment.
- Australian Infrastructure (AIX) reports continued passenger growth and posted 3Q passenger numbers +6.6% on-year.
- BlueScope Steel (BSL) got a new CEO for its Australian Distribution and Solutions.
Broker Stuff today…
- Credit Suisse cut its target price on Macquarie Group (MQG) to 5000c from 5500c despite maintaining their Outperform recommendation. They no longer expect to MQG to maintain their FY08 dividend in FY09 and although the stock is trading at a low multiple, they see opportunity for cheaper entry points over the next week or so.
- Lots of broker research on News Corp (NWS) on the back of their 1Q profit result yesterday. Mainly target price cuts — Macquarie Equities maintain their Outperform recommendation and 1929c target price arguing although the result wasn’t the best, the stock is, “Trading on a PE ratio of about 9x, the stock remains compelling value.”
- Citi cut their target price on Leighton Holdings (LEI) to 3000c from 4500c after reducing their forecasts for FY09 and FY10. They maintain their HOLD recommendation.
- Australian Performance of Construction Index came in at 36.4 in October, up from 31.8 in September. It is the 8th straight month PCI has been in contraction territory below 50.
- The Bank of England cut interest rates to a 54-year-low to fight off recession — the banks are coming under intense pressure to pass on the cuts.
- The Dow Futures are suggesting a 5 point rise on Wall Street tonight. MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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