The market is up 70 well ahead of the 7 point rise predicted by the SFE Futures this morning. Financials are up 3.7% — all the banks flying on a CBA guidance upgrade — CBA up 9% and pulling the whole sector up. Westpac up 8.0%. Resources up 0.3% — BHP and RIO up 2.9% and 4.3%. Gold stocks down on the lower gold price. Newcrest down 4.3% after completing their $750m institutional placement. Property tanking — down 5.0%. Stockland Group, CFS Retail Group, Dexus, GPT and Goodman Group all big fallers — all down 9-13%. Lend Lease (LLC) up 5% on being selected as the preferred partner to build GBP1.2bn in Birmingham schools.

The Dow was down 64. Down all session — negative 133 at worst. Nasdaq outperformed. Microsoft and Intel up over 4%. Tech stocks higher, financials and blue-chips lower. Uncertainty about the stimulus package and bank rescue plan is paralyzing the markets. Low volumes with slow news flow. Poor consumer and construction spending data. Manufacturing activity still at all-time lows. Financials up 0.2% — down 3.5% at worst. Big banks down 0.7%, Investment Banks and Brokerages down 0.88%. Bank of America down 8.8% and JP Morgan down 1.25%. Industrials and resources down. Metals up. Oil down. Gold down. Bonds up.

Main story is the CBA profit upgrade announcementthe CBA made an after hours announcement last night — interim results are going to be 20% above consensus although still 16% down on last year. They expect to report a $20bn cash profit. Good for the sector. Outlook — CBA say it is “extremely difficult to predict” and the economy is “increasingly challenging”. The improvement on expectations has come from stronger volumes and margins. So much for not being able to pass on rate cuts. Results are on 11th Feb. CBA recently did the bungled $2bn capital raising and increased provisions causing a wave of negative sentiment and a share price fall. CBA up 9.6% this morning to 2900c and has lifted the whole bank sector on hopes they too are seeing the same conditions and will be able to retain their dividends.

  • RBA rate cut announcement at 2.30pm – expecting anywhere between 75bps and 150 bps.
  • RIO and Chinalco — More details coming out of the possible deal between RIO and Chinalco. The suggestion this morning is that RIO are going to do a massive US$20bn deal selling stakes in a number of projects to Chinalco and solving all their debt problems in one hit. Chinalco expected to take a 15-20% stake ($15bn in equity and $5bn in convertibles). Deal expected to be announced with results on February 12th. Rio Tinto kept at BUY by Merrill Lynch with 6000c target. Says RIO has agreed to sell US$1.6bn in potash and iron ore assets to Brazil’s Vale. Says RIO requires additional US$5.5bn in funding through to 2010. Suggests a raising is not off the cards.
  • Westpac Bank (WBC) says there were $442m new shares issued at $15.26 per share as part of their share purchase plan.
  • Westfield Group (WDC) plans to sell $2.9 billion in new securities to institutional investors to repay debt. The news has smashed
  • Perpetual Ltd (PPT) reported unrealized losses from one of its credit funds continues to grow due to re-pricing of Australian-issued residential mortgage backed securities — mark-to-market pretax losses from its Exact Market Cash Fund at Jan 31 had increased by $9.6m to $24.3m from $14.7m at Nov. 30. Interim result will include net restructuring charges of $8.4m, a slight increase on a previous pretax estimate of $10m, and $4.4m of net realized and unrealized losses from investments.
  • Alumina Ltd (AWC) said FY08 net profit fell 61% to $168m from $438m in 2007. Cited rapid decline in metal prices — won’t declare a dividend.
  • Newcrest Mining (NCM) out of trading halt — completed their $750m institutional placement (increased from $500m thanks to the demand). Very well supported at $27. Now 2970c.
  • Incitec Pivot (IPL) have had a profits warning and fallen 30%.
  • United Group (UGL) announced that Incitec project delays will effect earnings — FY earnings growth to be at the low end of the 10-20% range.
  • Kagara Limited (KZL) offers shareholders the opportunity to participate in a share purchase plan. Down 4.8% after coming out of its trading halt post placement.

BROKER STUFF…

  • Merrill Lynch kept UNDERPERFORM and 3030c target on CBA after their profit upgrade — they upgrade their EPS forecasts but note bad debt issues remain. GSJB Were maintain SELL and want further clarity on future earnings. Citi keep HOLD with 3050c target.

OTHER NEWS…

  • According to the AFR, Coca-Cola (KO) and Japan’s Kirin Holdings are understood to have put the merger of their Australian proxies Lion Nathan (LNN) and Coca-Cola Amatil (CCL) firmly in the mix for a merger.
  • US GDP expected to contract at 5.5% per annum this quarter down from -3.8% in the 4th Q.
  • The Dow Jones futures suggest a 10 point rise on Wall Street tonight.

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