The market is down 30 underperforming the 97 point rise predicted by the SFE Futures this morning after strong gains in the US. Up 24 at best but the banks are dragging the index down on the back of a $2.5bn institutional capital raising announced by Westpac Bank. CBA down 7.3%. Resources outperforming on the strong rise in commodities overnight — but have been pulling back throughout the morning – BHP and RIO up only 4.4% and 3.1% nearing midday. Energy stocks just up. Santos down 1.1% on deferring their Reindeer project with JV partners — down despite the 6.5% rise in the oil price and rumours persisting about a takeover by China National Petroleum Corp. Woodside also down 1.4%. Big industrials down. Property down 3.2%.
The Dow was up 298. Up all session — up 390 at best. All 10 sectors up. Average volumes. S&P 500 up to a one-month high as Obama pledged to boost the economy with the biggest public works program since the 1950’s. Commodities up on the back of Obama’s infrastructure program. US Steel Corp and Alcoa up over 17%. Oil up 6.53% on the possibility of “severe” production cuts by OPEC and the announcement of new measures from several countries to boost their economies. Chevron up 5%. Construction stocks up. General Motors up 21% as democrats send a $15bn bailout proposal to the government. Ford up 19%. Defensive stocks underperform. Both BHP and RIO up in ADR form overnight, 8.8% and 11.5% respectively. Both up 15% in the UK. Metals all up. Gold up. Bonds down. A$ up 2.98% against the US dollar with the rise in commodities. Germany and France up over 7%. Japan’s Nikkei up 5.2%.
Banks struggling — Westpac Bank (WBC) in a trading halt — it plans to raise $2.5bn through a share placement (talk of its being at $16, a 10.5% discount to its last trading price) to institutional investors to lift its capital position due to current market volatility. Says merger with St. George is going as expected. It holds its AGM tomorrow. The fact that the banks are raising capital makes it more likely that they will retain their dividends … although you have to ask … at what cost. They are losing more in capital value by doing the placements. The annual dividend cost for WBC is $3.74bn.
In the news…
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- Skilled Group (SKE) has provided a trading update – it reiterated FY09e EBITDA guidance of $100m-$110m with no change to its debt outlook. Net debt increased from $245m in FY08 to $320m, but SKE expects debt to fall to a range of $280m-$300m by the end of FY09e. According to GSJB Were, the stock is trading on a FY09 PER of 4.9x with a dividend yield of 15%.
- Pacific Brands (PBG) is cutting its dividend to 3c in the 1H and is likely to pay a similar amount for the remainder of the year.
- Santos Takeover talk — The Santos 15% shareholder limit was removed on 29 November. The share price was up 9% yesterday as the South China Morning Post ran an article saying that China National Petroleum Corp is looking at making a joint bid for them with a foreign oil company.
- Perilya (PEM) announced it would place $45.5m worth in new shares with Chinese metal company Zhongjin at an issue price of 23c, giving the Chinese company a 50.1% stake.
- Fairfax Media (FXJ) remains in talks about a potential sale of its Southern Star TV production arm.
- Gunns (GNS) expects a profit increase before significant items and income tax but not greater than 15%.
- BlueScope Steel (BSL) is in a trading halt until Thursday – they have announced a capital management initiative.
- Harvey Norman (HVN) announces a 1.2% rise in like-for-like sales in the 28 days to December 7 compared to the same time last year. Margins continue to be under pressure.
- Macquarie Office (MOF) is in a trading halt.
Broker Stuff today…
- Citi cut Brambles (BXB) to Sell from Hold and their target price to 680c from 720c believing the stock is due for a sell off after outperforming the market by 5%.
- Deutsche Bank maintain their Buy recommendation and 3685c target price on Leighton Holdings (LEI) after it won a sizeable contract yesterday to construct Dubai Airport’s Concourse. They see value in the stock which is currently trading on a FY10 PER of 9x.
- J.P. Morgan maintain their Overweight recommendation on Santos (STO) and 2230c target price saying it’s their favourite stock in the PNG LNG sector.
Other Stuff today…
- According to the newswires, informal iron ore contract negotiations have begun and China wants to pay for iron ore what it was paying back in 1994.
- Fortescue Metals (FMG) CEO Andrew Forrest says his company’s assets would be attractive to BHP Billiton but he wishes to stick to his current growth plans.
- Dow Future suggests a 30 point fall on Wall Street tonight.
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