Our market is up 9 — up 49 at best — a little disappointing considering Wall Street had a positive session overnight and the SFE Futures suggested a 46 point rise. Resources have managed to slip into negative territory but most of the other sectors are above water. The big news today is Wesfarmers going into a trading halt after announcing they will be raising more capital to ease their debt concerns. The major banks all up 1-2% after ASIC increased the shorting ban period on financials for 6 weeks.
The Dow was up 279. Both BHP and RIO up 6.8% and 10.5%. Metals smashed. Oil price up 10.3% to $42.56 despite expected higher inventories. Gold down. Bonds down. A$/US$ up to 66.42c. Markets rebounded after the sharp inauguration day falls. Financials up 14.6% on better-than-expected results and PNC Financial Services Group topping 4Q expectations. Banks had double-digit gains — Bank of America, JP Morgan and Citi up 25-30%. Technology stocks up 5.4% with IBM easily beating consensus. Energy stocks up on the higher oil and gas price. Homebuilder’s confidence at record new lows
Wesfarmers has announced a 3 for 7 $2.8bn rights issue at 1350c today — a 20% discount to the market price of 1683c. Most banks did theirs at a 10% discount. WES is in a trading halt as they conduct the $1.9bn institutional placement. The money goes to help service the $18bn of debt they took on with the Coles acquisition. Debt will be down to a “conservative” $6.9bn post the issue.
In the news today…
- Woodside Petroleum (WPL) reported 4Q output up 28% on year — in-line with guidance but at the low end. FY output to be up 15% on year with record revenue in the 2H helped by the AUD/USD. FY08 net profit to be $1.75-1.8bn up 70-75% on year. Said the underlying result for the 2H will be impacted by foreign exchange losses associated with US dollar liabilities and hedging.
- Newcrest Mining (NCM) reported production down 21% for the quarter to December. Gosowong and Cadia Hill mines in Indonesia and NSW declined off record levels. Copper production was in-line. Guidance ranges for FY production slightly changed — Gosowong slightly higher, Telfer gold and copper moved down. Cost initiatives are being aggressively pursued to ensure guidance is delivered.
- Goodman Group (GMG) announced a restructure with redundancies at 16.5% of their workforce. Said it achieved operational efficiency initiatives with an annualized operational cost savings of 20%.
- AJ Lucas Group (AJL) will use the $34m from the sale of its shareholding in Sydney Gas to retire debt.
- CBH Resources (CBH) will not be proceeding with its Perilya takeover bid.
- Sundance Resources (SDL) indentifies new exploration targets.
- St Barbara Limited (SBM) said 2Q gold output was up 84% on the September quarter.
- Ausenco Limited (AAX) awarded Los Bronces pipeline engineering contract.
- MYOB Limited (MYO) removed from official quotation.
- The Australian Government is finalizing plans for a new special purpose vehicle to assist property companies to refinance maturing debt.
Broker Stuff today…
- JP Morgan downgraded their recommendation on BHP Billiton (BHP) following their 2Q production numbers to Neutral from Overweight and their target price to 2750c from 3700c. They described the production numbers as “disappointing”. ABN AMRO also cut their target price to 3151c from 3612 but maintain their BUY recommendation as do GSJB Were.
- David Jones have also had their target price cut by three brokers after cutting their sales and profit guidance yesterday. Credit Suisse have a 230c target price, down from 250c and ABN AMRO have a 256c target price, down from 280c.
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