The market is down 6 and drifting — up 36 earlier — underperforming the 27 point rise predicted by the SFE Futures this morning. Industrials and financials up. Energy up. Discretionary stocks up. Resources and healthcare stocks down 2.8% and 1.6%. BHP and RIO both down — dragging the index down 20 points between them.

The Dow was up 178. All sectors up. Dow up 4.7% for the month — but down 15.7% year-to-date. The S&P 500 up 14% (Dow up 13%) from the low on March 9. Optimism about the banking sector continues. US Financials up 6.6% — closed on their high. US Retailers, homebuilders and construction stocks up on a surprise leap in housing starts. February PPI increased more-than-expected. Technology shares up on positive broker comments about Cisco. Energy shares up on the rebound in oil. US Materials underperform relatively — up 0.4% — Alcoa down on announcing 1Q loss. Rio Tinto said outlook for commodities is weak. Steel stocks closed down 7.4% due to the pessimistic outlook from some of the major producers. BHP and RIO mixed in ADR form overnight — BHP up 1.60% and RIO down 3.28%. Metals mixed. Oil up 3.5%. Gold down $5.20. Bonds down. A$ down.

David Jones (DJS) posted 1H NPAT up 2.4% to $91.2m. Up 6.4% this morning. A solid result and in line with most forecasts. Sales were down 6.4% to $1.06bn in the 2H. The result was driven by strong cost savings initiatives. Management said like-for-like sales in the second half were likely to fall about 10%. The market is likely to focus on whether DJS can maintain the cost savings across employee expenses and occupancy rates. Profit growth guidance for the 2H09 was reaffirmed at 0%-5% with the first 7 weeks of the 3Q already on track. FY10 profit guidance flat at 0%-5%. The record level 1H08 dividend level was maintained at 11c.

RIO is down 8.8% this morning. There is a lot of publicity about MP Barnaby Joyce and his public advertisements rejecting the Chinalco deal and people are beginning to factor in a higher chance that the deal will not go through. Something that would leave RIO with a debt issue and shareholders with a $10bn share issue to contend with. Basically you wouldn’t want the Chinalco deal to fall over. There has also been a lot of coverage of its Annual Report published yesterday and the new chairman appointment … who is not a resources man. Goldman Sachs JBWere downgrades Rio Tinto (RIO) to SELL from Hold due to concerns over their debt levels and the dire outlook for aluminium. Were’s say the $44bn in debt from the Alcan deal threatens the survival of the company and means they have to sell US$19.5bn of their best assets to China’s Chinalco.

AXA Asia Pacific (AXA) come out its trading halt after a $500m placement at 285c and rather than fall over as expected it rose 5.3% to 339c. A good performance which suggests institutional placees are looking beyond tomorrow for the first time in months. Investors in the placement are up 20%. AXA of course have been in a trading halt for a day whilst the market went up 3%.

  • Computershare (CPU) at their analyst presentation said their recapitalization process is likely to continue as their marginal income is squeezed. Said they have a strong revenue base.
  • Aquila Resources (AQA) announced a 100Mt increase in total resources at their Eagle Downs Project.
  • Riversdale Mining (RIV) said their coke tests confirm a potential resource at Benga.
  • Gloucester Coal (GCL) — Australian Takeovers Panel rules against the proposed $800m all-share merger with Whitehaven Coal (WHC). Noble (N21.SG), Gloucester’s largest shareholder, launched a $4.85 /share, $396m cash offer for Gloucester to derail what was essentially a reverse takeover deal.
  • Futuris Corp (FCL) at an agribusiness conference said they expect to return to profitability in the current period and are positioned for improved results in FY10.
  • Nexus Energy (NXS) extends its voluntary suspension as CFO Peter Thomas resigns. Extend asset sale program and debt raising talks. NXS notes their Longtom gas project is on schedule and have received no acceptable firm offers on Crux.
  • Rio Tinto (RIO) appoints a new chairman.
  • ANZ’s deputy CEO Bob Edgar will retire on April 30 after 25 years. Graham Hodges will replace him.

Other…

  • The Oz Minerals decision from the FIRB is expected to be handed down on Friday. The price is down to 58c — the bid is 82.5c. The odds are on the deal being allowed through but the traders are understandably concerned … if its doesn’t go through they’ll likely lose 100%.
  • Steel stocks down 7.4% in the US and this morning we have Merrill Lynch downgrading our steel stocks: OneSteel (OST) – NEUTRAL recommendation — cut its target price to 200c from 850c — to reflect their views on the global steel outlook. They have cut their earnings expectations for the company, particularly in iron ore, scrap and manufacturing by 43% in FY09, 69% in FY10 and 64% in FY11. A 200c target price is FY10e earnings, “which is a 30% discount when compared to the traditional rating of 11x”. BlueScope Steel (BSL) had its recommendation cut to UNDERPERFORM from BUY — cut target price to 200c from 500c — following their assumptions on the global steel outlook. They expect NPAT of 18c a share in FY10, (lower NPAT forecast by 42% in FY09, 54% in FY10 and 25% in FY11) which on historical PER of 12x would give a valuation of 216c.

The Dow Jones futures suggest a 20 point fall on Wall Street tonight.

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

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