The market is down 52 underperforming the 13 point fall predicted by the SFE Futures this morning. Industrials down 2.9%. Financials down 2.2% — banks all down following the grim lead in US financials. US Banks hit 17 year low. The NAB’s Ahmed Fahour will quit the board as director. NAB down 2.9%.
The Dow was down 89. Market retesting 3-month lows. Sustained concerns about financial companies. Financials down 5.2%. Tech stocks down 3.3%. Hewlett-Packard scales back guidance –down 8%. Investors brood over latest batch of earnings numbers. January PPI numbers up more-than-expected. Weekly jobless claims higher-than-expected. Leading Indicators came in at +0.4% against forecasts of +0.1%. The Philadelphia Fed Manufacturing survey came in at -41.3 against estimates of -25. Metals up. Oil up. Gold down. Bonds down. A$ up.
RBA semi-annual statement on monetary policy – Glenn Stevens the RBA Governor appeared before the House of Representatives Standing Committee on Economics at 9.30am. Since their last appearance they said they have seen the worst financial turmoil in decades and that market sentiment remains fragile. Still hold open the chance of further rate cuts. Suggest the expansion of China is not over and that on a relative basis the “Australian economy will come through this very difficult episode — certainly not unscathed, but well placed to benefit from a renewed expansion.”
The next RBA Meeting is on March 3rd with the consensus for a 50bp cut followed by 50bp in April and another (and final) 25bp interest rate cut in May. By that time interest rates will be down to 2.0%.
- Fortescue speculation — Deal expected tonight — Suggestions that after market tonight China’s Hunan Valin Iron & Steel Group backed by China Investment Corp will announce a capital injection into Fortescue Metals through a convertible note. The AFR says Hunan Valin Iron & Steel Group has submitted a Foreign Investment Review Board application for an expected investment of as much as $3 billion in Fortescue. Some analysts think the news will not be well received as it highlights the fact that FMG need cash (most of their cash pile being committed to debt service reserves and other payments) and also because the stock has doubled in a month partly on speculation of an all out bid. This is not a bid.
- RIO revolt — The Times in London reported major RIO shareholders (Legal & General) in the UK are planning a board room coup to reinstate chairman elect Jim Leng over disgust with the RIO endorsement of the Chinalco deal, a failure to engage BHP, the acquisition of Alcan and the pricing of the convertible bonds being offered to Chinalco.
- GPT up 28% yesterday on a rumour Stockland were going to bid for them. Stockland bought a 9.8% stake in GPT at 110c on February 11th. The price is now 52c down 2c today.
- Oz Minerals sale — OZL is expected to announce the sale of the Martabe gold mine in Indonesia to a company including private equity backers and Owen “Stronger Forever” Hegarty who will finance the deal through an IPO. Deal expected before 27 January deadline for asset sales and combined with the sale of Golden Grove could mean a higher payout from China Minmetals if the bid is allowed. OZL down 1c to 65c. The bid is 82.5c.
- Gold stocks well down as the gold price falls $1.70 but US gold stocks fall around 5%. Newcrest down 6.4% and Lihir down 2.3%. We are still waiting for St Barbara Limited to come out of its trading halt having done an institutional placement.
- Fairfax is falling over still … down 3c to 96c. They have results on Monday. This is an all time low.
- Santos takeover talk — The Australian suggests Santos is a piece of low hanging fruit for another global giant. BG Group apparently ran the ruler over them last year. China National Petroleum has also been rumoured as a bidder as has Shell. Good results yesterday. Weathering the financial crisis with a strong balance sheet and cash.
- Property down another 1.5% — Goodman Group up 9.7% early on 1H operating income after tax of $215m.
- Coal stocks doing well with some corporate action between Whitehaven (WHC) and Gloucester Coal (GCL) who are planning a merger to create a $900m coal miner. 1 GCL share for every 2.45 WHC shares.
- Billabong (BBG) — Down 5.6% on results below expectations — Reported a 22.2% increase in sales to A$808.6m. EBITDA was steady at A$147.3m. Profit fell 7.1% to A$82.4m against analyst expectations of $87.7m. US margins fell.
- Caltex (CTX) down 10% on the open posting NPAT for the FY down 95% to $34.3m. Scraps dividend. Better than guidance range of -$40m to +$10m although the replacement cost of sales profit was only in line with expectations. The outlook comment is that “the economic slowdown may impact both marketing growth and regional U.S. dollar refiner margins in 2009.”
- Goodman Group (GMG) expects 1H09 operating income after tax of $215m, operating earnings per share of 11.1c and a distribution of 9.65c. Accounting loss will be $470m due to property revaluations.
- Minara Resources (MRE) posted FY gross profit down to $8.4m from $403.3m a year ago. Net loss of $19.8m. Dividend zero.
- Macquarie Airports (MAP) said January profit down on-year at all 4 major airports. Down 6.5% with some brokers cutting their price targets after results yesterday.
- Wealth Managers cutting dividends – AMP cut their dividend yesterday. AXA Asia Pacific and Perpetual Trustees both cut their dividends earlier in the week.
The Dow Jones futures suggest a 21 point fall on Wall Street tonight.
MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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