Disappointing start to the week — our market is down 30 despite getting off to a good start. Poor response to Wall Street’s late 500-point-rally. Resources outperforming, BHP and RIO only up 1.4% and 0.5% after being up 3% early. Gold stocks are the best performers after the gold price jumped 5.8%. Newcrest and Lihir up 10.9% and 14.4%. Banks and financials dragging the market on concerns over Babcock & Brown potentially going under.

The Dow was up 494. Up 519 at best. Down 103 at worst. 500-point run in the last hour on Barack Obama nominating New York Federal Reserve Bank chief Timothy Geithner to be the next head of Treasury. Heavy volumes and bargain hunting. Other Main Points: Obama expected to announce the rest of his financial team tonight. The auto industry still an uncertainty with its potential for collapse which would impact on the broader US economy.

A$ up 3.45% against the US dollar as energy, mining and resources stocks lift. Both BHP and RIO up in ADR form on Friday, 18.3% and 14.8% respectively. BHP up $1.10 compared to its close Friday on the ASX. Metals all up on Friday except Aluminium (down 1.93%). Copper up 1.9%, Nickel up 0.5% and Zinc 0.25%. Oil price up 36c to $49.22 for the first time in six days on talk Barack Obama will announce a new stimulus package to revive economic growth. Gold up $43.10 or 5.8% to $791.80. Bonds down with the 10 year yield up to 3.20%.

Making the news today…

  • IOOF (IFL) and Australian Wealth Management (AUW) plan to merge — both boards recommend the deal with AUW holders getting 1 IOOF share for 3.73 of their shares. The merged group will have $88bn under management.
  • Lend Lease (LLC) has lowered its offer for a 12.5% stake in Babcock & Brown Communities Group (BBC) after completing talks with its lenders and undertaking further due diligence. It is now offering to pay 29c a stapled security for Babcock & Brown’s stake, down from the previously agreed 58c. LLC will pay $17.5m to become BBC’s manager.
  • Suncorp-Metway’s (SUN) has already included a provision for Babcock & Brown in its guidance for impairment losses for the year.
  • Babcock & Brown (BNB) are in a trading halt after not being able to resolve a dispute with a bank over a deposit.
  • Bank of Queensland (BOQ) has raised $29.6m and issued 2.93m shares under its dividend reinvestment plan.
  • Mount Gibson Iron (MGX) has signed an agreement with China’s Shougang Corp. and APAC Resources over iron ore sales and a fully underwritten capital raising.
  • Connect East (CEU) has requested a trading halt pending an announcement.
  • Dexus Property Group (DXS) has obtained refinancing for all 2009 debt maturities.
  • Mirabella Nickel (MBN) has extended its US$80m bridge financing facility.
  • Aristocrat Leisure (ALL) has suspended its dividend reinvestment plan for its next 6 monthly supplementary dividend of 2c.
  • Arrow Energy (AOE) has signed a deal with China’s Chang Mining Group to develop a coal bed methane project in Shaanxi Province.
  • Apex Minerals (AXM) has announced additional gold resources at its Gidgee project in WA.
  • Macquarie Group (MQG) has gone 145c ex dividend today.

Broker Stuff today…

  • UBS Warburg cut their recommendation on Oz Minerals (OZL) to Neutral from Buy saying its cash flow is worse than they thought. They cut their target price to 65c from 100c. They have concerns over the debt refinancing required next month.
  • Spotless Group (SPT) was upped to Neutral by Macquarie Equities and maintain their 240c target price after its AGM on Friday. The company is looking OK thanks to its sizeable order book.
  • Deutsche Bank maintains its BUY recommendation on Sims Group (SGM) despite cutting its target price to 2660c from 2996c saying, “While the current environment is extremely uncertain, we believe SGM’s share price currently more than factors this in.”

Other Stuff…

  • Expectations are that Barack Obama will announce a US$500-700bn economic stimulus package when he takes office on January 20th.
  • The Dow Futures suggest a 16 point gain on Wall Street tonight.

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

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