The market is up 4 == up 28 early at its high. The SFE Futures predicted a 21 point gain this morning. Resources and property trusts outperforming.

The Dow was up 3. Up 89 at best. Down 59 at worst. Held yesterdays gains — first two-day rising stint since for over a month. Technology stocks outperform. Analyst raised Hewlett-Packard’s rating. Analysts still warning the banking sector is deeply troubled. Financials up 2.4% as Freddie Mac asks the government for another $30.8bn after posting a $50bn loss last year. Healthcare stocks down 2.0% — Pfizer had its credit rating cut by Moody’s to Aa2 from Aa1. Energy stocks down 1.2% — down on the 7.4% drop in the oil price. Short term traders dominated the market. A CNBC report said JP Morgan Chase was profitable in the first two months of the year. BHP and RIO both up in ADR form overnight — 1.93% and 4.54% respectively. Metals mainly down. Gold up. Bonds up. A$ up.

National Australia Bank Strategy Update — Confirmed (what many expected) a 25% cut to their interim dividend and said they would make some major restructures at nabCapital which has been the source of much of their bad debts due to risky credit instruments — there was no material change to their last update on the 6th of February. They noted asset quality was deteriorating in-line with expectations. NAB will continue business in the UK market but expect challenging conditions to remain for some time. They are looking at acquisitions in the Australian market to continue their organic growth strategy. The share price is in positive territory this morning and outperforming the other major banks.

Making the news today…

  • Timbercorp (TIM) increase their doubtful debt provision.
  • IBA Health Group (IBA) in a trading halt relating to a capital raising — Allco Equity Partners will support the raising.
  • CBH Resources (CBH) said the Wonawinta earn-in is completed.
  • Kingsgate Consolidated (KCN) said gold production continues towards full capacity.
  • SAI Global (SAI) note Equinox Minerals’ (EQN) statement on takeover and board changes.
  • Henderson Group (HGG) circulates their offer document for their proposed New Star acquisition.

Other…

  • Credit Suisse cut Aristocrat Leisure (ALL) to NEUTRAL from Outperform and drop price target to 390c from 475c on the expectation that North American slot machine demand will remain below 2005-2007 levels for the next five to seven years.
  • Merrill Lynch keep Cochlear (COH) at NEUTRAL with a price target of 5805c noting sales from their hearing implant may slow in the 2H with the introduction of a competing product by William Demant Holding in the US.
  • UBS say they prefer RIO to BHP because “1) The current RIO/BHP share price ratio of 1.6x is still substantially below historical levels of 2.5-3.0x and that implied by earnings forecasts; 2) On our new forecasts, RIO trades at a discount to BHP on both P/E and EV/EBITDA metrics; and 3) Using spot commodity prices, RIO is still better value trading for a 30% discount on an EV/EBITDA and P/E basis”. UBS have a 3250c target price on BHP (now 3050c) and a $60 target price on RIO (now 4980c).
  • Energy sector struggling on the lower oil price and after Citigroup dropped their oil price forecasts to US$47 in 2009 and $55 in 2010. These are down from $65 and $75. On the back of that they have downgraded a number of oil stock earnings numbers including their BHP FY09-10 earnings by 6% and 14% and their BHP target price from 3130c to 2890c.
  • The Sydney Morning Herald reports “China hit raises fear of great recession”. Noted Chinese trade numbers yesterday saw a shock 25.7% fall in Exports in February YoY — analysts had expected exports to rise 1%. Imports down 24.1%. The Feb Trade surplus was just US$4.84bn down from US$39.1bn in January. Feb iron ore imports were up 22% but the rise is seen as a restocking process ahead of the stimulus package kicking in rather than a reflection of demand.
  • February’s employment data showed 1,800 jobs created since January versus the expected drop of 20,000 jobs–– better-than-expected but full-time employment was down 53,000 and the overall jobless rate rose to 5.2%. Overall, the jobs data is showing resilience in light of plummeting consumer and business confidence.

The Dow Jones futures suggest a 30 point fall on Wall Street tonight.

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

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