The market is up 49. The SFE Futures were up 20 this morning.

Dow Jones down 17 — Not much to go on overnight — London closed for the Diamond Jubilee celebrations (so no LME trading). Factory orders fell for the third time in four months (-0.6% versus Est +0.2%). US market still weighed down by last Friday’s jobs numbers. Dow up 25 at best and down 83 at worst. BHP fell 0.3% in ADR form but was up 55c on last nights close in Australia. Banks in the US had a rough night — JP Morgan, Citigroup and Goldman all down around 2% on talk of a credit rating downgrade for Morgan Stanley (down 2.91%). European markets up — Spain up 2.88% on some softening in the Merkel stance with pressure on her to agree to EU support for European banks and Spanish banks in particular. Spanish 10 year bond yields hit a high of 6.569% before closing lower at 6.41%. European commission debating giving EFSF money to Spain. Oil up 75c. Gold down $8. Aussie dollar down buying $97.22.

Main points:

  • Wayne Swan has given a press conference this morning the main point of which appears to be the statement that a Budget surplus gives the RBA “maximum flexibility” at its meeting today. In other words he is giving as direct a message as he can to the RBA to cut rates — surely he would do that behind closed doors, in which case he is playing politics — laying the groundwork to claim the credit for any rate cut.
  • RBA Meeting today 2.30pm – nine economists expect no change, 14 expect a 25bp cut, 4 expect a 50bp cut.
  • Qantas Airways (QAN) has put out a profit warning. They now expect a fall of up to 91% in their FY profit due to European economic volatility, high Aussie dollar and increased fuel prices. Profit is expected to be in the range of $50m-$100m down from $552m in the previous financial year. The loss will also include a one off cost of $100m which is associated with industrial action that occurred this year. The international arm is expected to post a loss of earnings of $450m whereas the domestic arm is forecast to deliver earnings of more than $600m, up from last year. QAN shares are down 40% in the last 11 months and have hit an all time low today. QAN is down 15.49% to 120c. It will not he the last profit warning before the results season.
  • Sundance Resources (SDL) have finalised terms on the development of their iron ore project with the Cameroon Government and takeover suitor China’s Sichuan Hanlong Group. SDL is up 3.13% to 41c.
  • Australia recorded a current account deficit of $14.89bn in the March Q resulting in a 0.5% drag on growth in the March Q GDP. The market consensus forecast was for a deficit of $14.65bn in the quarter.
  • Virgin Australia (VAH) announced that the Abu Dhabi owned Etihad Airways has taken a 3.86% stake. The Arab Emirates-based airline acquired the holding through a series of on market purchases. The strategic move will help strengthen an alliance between the two companies which was formed in 2010. VAH is trading on a PE of 9.5x which is lower than their competitor Qantas (QAN) on a PE of 11.6x. VAH is up 1.22% to 41.5c.

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