Our market is up 29 after being up 94 points earlier. The SFE Futures predicted a 70 point rise this morning. Resources had a strong start but are only 2.4% up nearing midday — BHP having a good day, RIO not so good. Financials up 0.6% – the banks have pulled back — up only about 1% now with CBA outperforming. Property trusts struggling — Westfield down 2.7%.

The Dow was up 270. Up 287 at best. Down 6 at worst. The S&P 500 rose 3.5% in the last 90 minutes. Very volatile trading. Stocks rebound off the worst fall since October — regained 40% of yesterday’s falls. All 24 industry groups up. Automakers submit their bailout plans to the government. 4Q Auto sales dismal. A$ up 0.62% against the US dollar. US dollar down 0.81% against the Euro. BHP up 1.8% in ADR form overnight, RIO down 3.6%. Metals mostly down overnight — Nickel down 3.14%, Aluminium down 2.07% and Copper down 1.01%. Zinc up 0.6%. Oil price down 4.6% to 3 a year low of $$47.05 despite some analysts saying the price might have bottomed. Gold up $6.50 to $783.30. Bonds up with the 10 year yield down to 2.69%.

Big story of the day — British Airways has announced it is in merger talks with Qantas Airways, which could potentially create a business with revenue of £14.9bn. On the back of that British Airways was up 12.46% in London trading at 157.10 pounds, down 56% from its year high. Both airlines expected to retain their brands. It was only four years ago that BA sold its 25% stake in Qantas. BA is already in ongoing discussions with Spanish airline Iberia. Any deal would have to satisfy the Qantas Sales Act and have to be approved by the federal government. Qantas has already had a chat to them about a potential merger.

In other news today…

  • BHP Billiton (BHP) is temporarily cutting manganese production at its 60% owned Samancor operation due to weak market conditions. Cuts are expected to cut ore production by 21%.
  • Woodside Petroleum (WPL) announced its JV partners which includes BHP Billiton, have approved $1.8bn in spending on the redevelopment of the Cossack oil project off northwest Australia.
  • Talk of the market factoring in the possibility of Rio Tinto (RIO) taking a $US7bn write-down on its $US38bn acquisition of Alcan when it announces its FY results in February.
  • Don’t hold your breath on Babcock & Brown (BNB) making an announcement on the result of its bank negotiations. It was due today. BNB last traded at 25c.
  • Boart Longyear (BLY) doing OK despite cutting its FY08 revenue growth guidance to 18% on-year compared to their previous guidance of 22%.
  • Trading Halts galore in the property trust sector with Dexus Property (DXS), ING Office (IOF) and ING Industrial (IIF) all suspending their shares. IOF and IFF are expected to announce capital management initiatives while DXS may announce a capital raising.
  • Paladin Energy (PDN) makes an off-market $17.8m scrip bid for Fusion Resources — unanimously accepted by directors.
  • Kagara Limited (KZL) extends its Lizard Lounge deposit with a 3.2% Nickel intersection at 62m.
  • Linc Energy (LNC) has gone into a trading halt in relation to its acquisition of Gastech.
  • Kingsgate Consolidated (KCN) says it doesn’t expect its Chatree gold mine to be affected by the political issues in Thailand.

Broker Stuff today…

  • Citi upped their recommendation on both BHP Billiton (BHP) and Rio Tinto (RIO) to Buy from Hold and argues BHP’s decision to walk away from RIO makes sense. Despite the upgrades, they cut their target price on BHP to 3930c from 4800c and on RIO to 6900c from 11900c.
  • GSJB Were downgrades their media sector earnings expectations just six weeks after their last downgrade on October 23. They expect the macro environment to worsen. They maintain their Buy recommendation on News Corp, Sell recommendation on Fairfax Media and West Australian Newspapers.
  • Citi maintain their Buy recommendation on Wesfarmers (WES) and 2910c target price but adds, “We believe the lower coal price outlook combined with the departure of Finance Director Gene Tilbrook will increase share price volatility and concern about debt refinancing.”

Other Stuff…

  • Australia just grows with a seasonally adjusted GDP figure of 0.1% in the September Q — less than the 0.2% expected.
  • After a 3.0% rate cut in three and a bit months (biggest combined cut since 1990 recession — lowest rates since May 2002) the Futures markets are predicting a fall in interest rates to 2.76% by May.
  • The Dow Futures suggest a 39 point fall on Wall Street tonight.

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