The market is down 125 points after heavy falls on Wall Street on the back of poor manufacturing data and official recognition of the recession. Resources copping it — down 6% after recent outperformance — BHP and RIO down 7% and 8% on the open. Oz Minerals has said it will remain in a trading halt for a month as it desperately negotiates the refinancing of $560m in debt. Fortescue Metals down 10.5% after yesterday’s 21% rally. Property stocks down 4.1%. Financials down 3.2% following a 17% fall in US financials on miserable forecasts about massive reductions in the availability of credit card debt.
The Dow was down 679 points (7.7%). Down all session — down 687 at worst. National Bureau of Economic Research announced the US is officially in recession — has been for 12-months. Bernanke says the economy is under still under stress despite the stimulus packages and range of interventions. Goldmans and Morgan Stanley had their 4Q earnings estimates slashed by Credit Suisse. November US manufacturing down to a 26-year low. October’s construction spending down more than expected. Profit taking after a strong 5-day rally. A$ down 1.94% against the US dollar. Both BHP and RIO down in ADR form overnight, 10.6% and 18.9% respectively. Metals all down. Oil price down $5.87 to $49.34. Gold down $42.20 to $776.80 (-5.15%). Bonds up with the 10 year yield down to 2.76% in a continued flight to safety.
RBA Meeting today — Decision at 2.30pm. Everyone expecting a 75bp interest rate cut taking official rates down from 5.25% to 4.5%. One economics professor expects a 125bp cut on the basis that there is no meeting in January and they don’t want to undercook it and have to come back in January.
In the news today…
- Metcash (MTS) has announced a 13% increase in 1H net profit (before significant items) to $97.3m, in-line with the $98.3m analysts’ had expected.
- Harvey Norman (HVN) said like-for-like sales for the 28 days to November 30 were up 0.5%. Margins continue to come under pressure. Sales down 0.6% in the 28 days to November 2.
- Rio Tinto (RIO) has terminated an accommodation contract with MAC Services Group.
- Wesfarmers (WES) said its finance director Gene Tilbrook will retire in the 1H of 2009 after 23 years with the company.
- ANZ Bank (ANZ) has warned its shareholders not to accept any unsolicited offers for their shares.
- Atlas Iron (AGO) has appointed Geoff Clifford as Chairman.
- Mount Gibson (MGX) has made some board alterations.
- Straits Resources (SRL) has extended their debt facilities.
- FKP Property Group (FKP) — Mulpha Australia increases stake from 16.6% to 22.8%.
Broker Stuff today…
- Credit Suisse reinstated coverage on both BHP Billiton (BHP) and Rio Tinto (RIO). They maintain their BUY recommendation on BHP Billiton saying, “The group boasts the best growth profile [because it can afford to keep growing], it offers the best diversification of commodities, and has the strongest balance sheet of any of the Big 5.” They maintain their Outperform recommendation on Rio Tinto and add, “Rio is our top pick for the sector. We think leveraged names will begin to outperform safety, and also feel the market is underestimating the benefits of the weak $A and Rio’s earnings power in iron ore.”
- GSJB Were cut their target price on Transfield (TSE) to 210c from 712c on the back of their capital raising. They expect only 20% of retail entitlement offer at 125c a share will be taken up.
- ABN AMRO cut their recommendation on Commonwealth Bank (CBA) to Sell from Hold.
- US interest rates are currently at 1.0%. The FOMC meet on December 15th with suggestions that they will cut rates 50bp.
- The Dow Futures are suggesting a 32 point rise on Wall Street tonight.
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