Shocking start to the week — we are down 104 nearly triple the 40 point fall predicted by the futures this morning. Financials and Industrials down 4.3% and 4.8% respectively following Wall Street’s poor session on Friday. BHP knocking 19 points off the index itself at midday. The RBA meet and decide on interest rates tomorrow — the bond market has factored in a 75% chance of a 50bp cut — if they cut rates it will be the sixth time in a row.

The Dow closed down 119. US Financials down 7.4% — down 18.4% for the month. Citigroup will axe their dividend, restructure the board and give the government a 36% share holding. US Industrial companies down 2.7% on the back of General Electric cutting its dividend. 4Q GDP lower-than-expected — down to an annualized rate of -6.2%. BHP and RIO down 1.94% and 2.76% in ADR form Friday. Oil up. Gold unchanged. Bonds down. A$ down. Metals down.

Macquarie Group getting smashed… down 8.5%. There were a number of weekend articles about the company including the Sydney Morning Herald’s front page article “Battered ‘N’ Bruised” which said no one is game enough to predict the demise of the company but that the global economic downturn was forcing them to rethink their business model. They note long term value investor Capital Group has been selling shares. The stock peaked at 9864c in May 2007. It is down 83.8% since then. The shorting ban on financials ends on Friday (unless extended and you have to imagine Macquarie is once again lobbying for it).

Fairfax (FXJ) up 2.6% has resumed trading today after their $500m institutional raising — 55% of the shares are held amongst big shareholders who have all taken up their entitlements…which one trader suggests will mean some short covering. There is a big outstanding short position in the stock (10-15%). Will raise another $184m in a retail offer on March 27th. FXJ will use the cash to pay down debt.

  • Telstra Corp (TLS) sold KAZ Group to Fujitsu Ltd for $200m.
  • Valad Property Group (VPG) announced a 1H09 $821m loss late Friday and said it had secured a deal with its bankers to roll over debt.
  • Maquarie Group (MQG) notes Macquarie Infrastructure Group (MIG) announced the completion of the sale of a 25% interest in Westlink M7 for A$402.5m at a 5% discount.
  • IOOF Holdings (AUW) will acquire 100% of Skandia Australia and Intech business for about $34m.
  • St Barbara Ltd (SBM) appoints Tim Lehany as CEO.

Broker stuff:

  • Harvey Norman (HVN) kept at OUTPERFORM by Macquarie Group with 246c target after a 57% fall in 1H09 profit posted Friday. Goldman Sachs JB Were cut their price target to 275c from 297c saying they have moderated the extent of the earnings recovery in 2011.
  • Woolworths (WOW) kept at OUTPERFORM with a 3498c price target by Macquarie Group after WOW announced a 10.3% increase in 1H NPAT to $983.3m Friday. Said top-line growth will moderate and margins with be compressed. Merrill Lynch keep BUY and 2614c price target. Goldman Sachs JB Were HOLD and cut price target to 3032c from 2148c.

Other stuff:

  • QBE down 11.3% on broker downgrades this morning on the back of their results on Friday. Both UBS and Credit Suisse cut their target price to 2400c and 2100c respectively.
  • The Australian 4th Q GDP number on Wednesday could see GDP growth move into negative territory for the first time this century.
  • The Dow Jones futures suggest a 60 point fall on Wall Street tonight.

In today’s edition of Marcus Today we summarize Warren Buffett’s much anticipated letter to shareholders and highlight his main messages. Well worth a read for every investor.

MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.

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