The market is up 28 slightly underperforming the 56 point rise predicted by the SFE Futures this morning. All sectors up. Property leading the way — up 3.2% with Stockland Group up 5.8% after recent savage falls. Dexus Group up 10.7% early saying they’re on-track to post EPS of 10.8c per security. Banks all up between 1-2% responding to a solid rise in the US banks overnight. NAB gave a trading update with no disasters — they are riding the storm. News Corp down 5% as they slash their earnings guidance and report a shabby set of interim results. Media sector a weak feature on the back of it.
Resources up over 1% as BHP and FMG keep rising on the theme of higher shipping rates and iron ore volumes and prices — Brazilian iron ore export volumes up 27% in January — the Baltic Dry index is up 28.4% in two days — iron ore spot prices have risen — the Chinese stockmarket is going up – BHP said yesterday the Chinese destocking process was near its end. Iron ore stocks having a moment in the sun.
Small resources stocks up despite the fall in metals overnight — Kagara Limited up nearly 11% early on. Nickel stocks strong on the China theme. Gold doing well on the higher gold price. Newcrest and Lihir up 3.5% on the open. Oil stocks mostly up on the slightly higher oil price.
The Dow was up 106. Up 151 at best. Down 111 at worst. Market rallies on the back of the government’s plan to introduce measures that would free-up bank lending across the broader economy. Financials up 1.4%. Technology stocks up on assumed higher consumer and business spending if the banks start lending more. Retailers up 3.3% announcing weak same-store sales. Wal-Mart stands out with Jan sales up 2.1%. Weekly jobless claims up more-than-expected. Cisco misses guidance. Materials and Energy up close to 3% each — oil and gas up. Gold up. Metals down. Bonds up. A$ up to 65.25c.
The RBA’s quarterly statement on monetary policy is out. They have cut growth forecasts to incorporate a technical recession and say the economy faces a “very difficult environment”. Expect 2Q GDP growth of just 0.25% and 0.75% for 2008-9, a bit below the government’s 1.0% forecast (tainted by politics). They talk about the economy seeing a significant stimulus from recent rate cuts and on the back of that a number of commentators now expect them to lift the pedal on interest rate cuts. They talk about a recovery in residential property in 2009. Looking for 3.25% growth in 2011 (up from 3.0%). The ANZ say “Unless something calamitous happens offshore or indeed domestically, we will get a more measured pace of easing”. HSBC declares the easing cycle is over and that the bottom is already here at 3.25%. JP Morgan suggest there may now be a halt in rate cuts until April or May.
- National Australia Bank put out a December Q trading update. It is pretty good … in line with expectations, which is good in this market because it contains no disasters and emphasises that the Nab are in a strong balance sheet position and appear to be gaining market share.
- News Corp is down 5% on shabby 2nd Q (interim) results overnight in the US. Rupert Murdoch says the result is a “direct reflection of the grim economic climate” and warns downturn could be “more severe and likely longer lasting than previously thought.”
- Some huge downgrades around in Suncorp-Metway earnings this morning after yesterday’s % profit warning, cut dividend, CEO departure and a $1.3bn capital raising. The placement is at a new record discount for a big stock capital raising of 37%. The price is going to fall on Monday.
- ResMed (RMD) up 6% early reporting record 2Q profit from new product launches and expanding margins. 2Q net profit up 26% to US$33.9m – sales up 10% to US$223m. Launched a number of new products in the quarter and expects to release more in the next 18 months.
- Futuris Corp (FCL) reported underlying earnings lower than expected — 1H underlying net loss of $23m expected due to falling fertilizer and chemical prices.
- IOF — ING Office Trust — said they have no plans to raise additional capital.
- Dexus Property Group (DXS) said they’ll post earnings of 10.8 cents a security and a distribution of 7.6 cents in FY09. Will write down $773m in asset values in the 1H.
- Merrill Lynch kept BUY on Macquarie Group after their announcement yesterday of $900m in additional writedowns, but cut target to 3310c from 3850c — said MQG had gone to lengths to reposition the business for the downturn. Goldmans keep BUY with 3470c target — drop Earnings forecasts in FY09 and 10 by 21% and 18%. Citi keep HOLD but cut target to 2658c.
- Suncorp-Metway — Macquarie Group maintain OUTPERFORM wit 759c target but said the market update revealed “an embarrassingly severe increase in impairments, a savaging of dividends and a requisite $900 — 1.3bn capital raising.” Thinks to bank needs to be split off and sold. Merrill Lynch cut EPS the next few years by 28%, 38% and 33% — drop to NEUTRAL and cut target from 900c to 600c. Citi have BUY and 713c target — said SUN announced in November that it had no need for a raising and would only do so if it had a “massive problem.”
- Rio Tinto (RIO) denies it is planning to announce results early, along with a big rights issue.
- Speculation that other media companies will be looking at large writedowns in goodwill, intangible assets and other assets in-line with the trends seen in offshore media companies — Fairfax said earlier in the week it would be looking at asset values in the normal course.
- The Dow Jones futures suggest a 13 point rise on Wall Street tonight.
MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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