The market is up 60 outperforming the 13 point rise predicted by the SFE Futures this morning. Having a strong day after showing great resilience yesterday following a terrible night on Wall Street Tuesday. All sectors bar property up on the open. The resources sector is leading the way — BHP up 1.9% and RIO in a trading halt pending results this afternoon and a deal with China’s Chinalco buying US$12bn worth of assets and making a US$7bn investment in equity. Fortescue Metals up over 6% early on. Energy stocks up despite the fall in the oil price and the decline in US energy stocks overnight. Gold stocks continuing their rally — Newcrest and Lihir up 4.1% and 5.7% on another $22 jump in the gold price. Smaller gold stocks doing better than that. Industrials up 2.1% – Coca-Cola posted solid results — up 3.5% early on.
Fosters pumping — up over 5% at 11am on no news. Other risers include Orica, Fosters, United Group, Toll, Macquarie Airports on no obvious news. CBA up another 3.0% after results yesterday. NAB down again. Seems the switch out of ANZ and NAB into CBA continues with NAB and ANZ seen as most likely to cut dividends. Mining Services sector having a moment as well with Macmahon up 9.5% and Monadelphous up 4.6%. Bradken down 7.5% on results yesterday — Goldman Sachs JB Were have cut their earnings numbers by 12% and 35% quoting debt concerns and an uncertain outlook.
The Dow was up 50. Up 95 at best. Down 36 at worst. The Senate agreed to a $789bn economic stimulus package designed to create millions of jobs — Obama to sign within a couple of days. CEO’s agreed to greater accountability regarding the spending of the taxpayer-funded $700bn bailout. Financials outperformed — up 5.2% — after recent heavy losses. Energy stocks down 1.3% on the lower oil price. Gold up $22. Bonds up. A$ up. Metals mixed.
RIO DOING A CHINALCO DEAL — RIO has gone into a trading halt this morning. RIO has Final results today (due just before 4pm usually — 6am in the UK). The press declares that Chinalco and RIO met in London last night to sign a deal; The deal thought to be worth a total of US$20 to RIO; The deal could be backed by the China Development Bank; Chinese to buy interests in 10 mines for US$12.3bn including a stake in Hamersley Iron considered by some as a “crown jewel”; RIO to also sell convertible shares worth US$7.2bn that if converted would take the Chinalco stake to 18-20% from the current 9%; BHP lobbying the Australian government to block the deal; This is why the Chairman elect Jim Leng resigned this week. The London Times reports just reported that BHP is expected to approach the RIO board to make a counter offer for some of the mines RIO has offered to Chinalco. Apparently BHP said they’d approach the shareholders directly if the board rejected their approach … which they have a habit of doing.
- January unemployment headline at 4.8% against forecasts of 4.7% although the numbers show 1,200 jobs added in January compared to forecasts for 16,500 jobs to be lost. Seems there have been changes in the way the survey is conducted which blurs the message. It is a notoriously volatile number anyway. Helps the government’s push to get the stimulus package passed in the Senate, something that is looking more difficult by the day.
- Australian business confidence at a record low according to the NAB business survey for the Last Q. Index hits minus 31 against -7 the previous Q. NAB expects the economy to contract 0.25% this year against RBA forecasts of 0.75% growth. The numbers lend themselves to further interest rate cuts.
- Leighton Holdings (LEI) have just released interim results and announce $2.6bn contract at the same time. Makes $111.6m down 56% … which looks to be in line with expectations at the headline. H1 dividend of 60c. $37.5bn of work in hand.
- Coca-Cola Amatil (CCL) posted FY NPAT of $385.6m, up 24.1% with a final dividend of 22 cents — up from 20c — a good result given the deteriorating conditions. Revenue down 5.9% on-year. CCL said they have had a strong start to the year. The downside is that CCL’s debt level has risen and free-cash flow fell to $113m from $158m last year.
- James Hardie (JHX) posted net operating profit for the 3Q increased 6-fold to US$111m, up form US$17.1m a year earlier. The Netherlands-based and Australian-listed firm’s sales in the 3Q fell 25% to US$254.4m. Net operating profit fell 56%. Said demand should continue to fall significantly. Price up 12% coming off an eight year low.
- In a counter bid, Arrow Energy (AOE) upped their unconditional offer for Pure Energy (PES) following the recent trump all-cash bid by British Gas. PES have recommended the revised offer. Bid is 1.57 AOE shares plus 300c cash valuing PES at 693c at the moment. PES now at 735c … expecting another counter bid. Whole thing is getting a bit frothy. Rest of the sector not really impressed.
- Macquarie Airports (MAP) posted Brussels Airport FY EBIT up 9.5% to EUR222.9m. Underlying Brussels EBITDA EUR218.3m.
- Suncorp-Metway (SUN) said total claims form the fires likely to be about $180m.
- Paperlinx (PPX) down 4.8% on a profit warning — 1H EBITDA will be more than 15% below last year’s result and more likely to be 40% below. Not all asset sales have been completed in Europe.
- APN News & Media (APN) said FY08 profit before non-recurring items will be within a 5% range of the previous year — most likely at the lower end of analyst’s expectations at about $148m. APN up 6%.
- Qantas Airways (QAN) said Jetstar will remove all surcharges on its trans-Tasman short and long haul A330-200 operated services.
- Worley Parsons (WOR) said Fluor WorleyParsons Artic Solutions has been awarded an engineering contract by Denali-The Alaska Gas Pipeline LLC, for its gas treatment plant (GTP). WOR up 4%.
- MEO Australia (MEO) down 33% on poor drill results.
- The outlook for consumer inflation dropping in the face of a rapidly slowing economy – the Melbourne Institute Survey expects consumer prices to rise 2.3% in the next 12-months, putting inflation expectations at their lowest level in over 10 years.
- Citi and Merrill Lynch keep HOLD and NEUTRAL on CBA with price target’s 3050c and 3390c respectively. Said dividend is safe for now. Said balance sheet and tier 1 ratio are healthy.
- Merrill Lynch also cuts NAB to UNDERPERFORM and drop NAB’s price target to 2100c from 2270c.
- JP Morgan keep WBC at UNDERWEIGHT and up price target to 1586c after revising their numbers following the CBA result.
- Following Boral posting 1H NPAT down 44% yesterday, Merrill Lynch maintain UNDERPERFORM and drop price target to 375c from 450c citing weakening the Australian housing residential sector hitting their Building Products margins. “We forecast earnings in FY10 to be down for the 5th consecutive year…” Credit Suisse keep NEUTRAL recommendation and up price target to 370c from 360c raising their EPS forecasts in the four years ahead by 3%.
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