Morning Market Report, Mar 28, 2007

The market is UP 13. The SFE Futures suggested a 16 point fall in the market this morning.

The Dow Jones was down 71.8 – It moved in a 91 point range and closed lower for the second consecutive session on the back of weak housing results and consumer confidence falling more than expected in March. Standard & Poor released data showing prices of single-family US homes fell in January compared to a year ago, its worst result in more than 13 years. The Conference Board also announced that consumer confidence fell to a five month low in March. Home builders DR Horton, Toll Brothers, Pulte Homes and KB Home closed down more than 1% after one of the biggest homebuilders, Lennar Corp, announced that ongoing weakness in the housing market will result in it missing its profit forecasts. First quarter in the US is coming for a close, no earnings results after then but many are expecting some profit warnings. The NASDAQ closed down 0.7%.

Resources doing well today, BHP up 14c to 2994c. Its CEO Chip Goodyear came out with some bullish comments regarding copper, nickel and other metal prices in an interview last night in Santiago. He said “I’m excited about what we’ll see over the next several decades as 2.5bn people in China and India and other parts of the developing world enter the world economy”. RIO down 2c to 7918c. Metals mixed overnight, Zinc down 1.7%, Zinifex up 2c to 1671c. Aluminium up 0.8% and Nickel up 0.7%. Copper down 2.6%. Oil price up $1.21 to $62.98 on the back of rumours of military confrontation in Persian Gulf involving Iran. Woodside up 33c to 3936c. Gold down $1.40. Newcrest up 8c to 2367c.

The market is in positive territory after opening the session down a couple of points, resources and banks have helped it push along. The A$ has hit a ten year high of $81.08 against the US dollar on the back of weak consumer confidence numbers in the US overnight.

Adelphi (ADI), ARC Energy (ARQ), Advanced Well Technologies (AWT), Baraka Petroleum (HKP) and Beach Petroleum (BPT) announced they have formed an alliance to collectively acquire hydrocarbon projects focusing initially on Africa. The companies will be able to pool their resources in seeking, evaluating and acquiring value projects.
Santos (STO). The stock is up 7% in the last week on the back of takeover speculation and the possibility of corporate restructuring. There have been a few pushing for the 15% ownership cap to be dropped.
JB Hi-Fi (JBH) down 3c to 758c. Music sales in the US fell by 20% in the 1Q07, they have been in decline since 1999 by an average of 4.3%. Credit Suisse has said that music sales in Australia would have to fall by more than 5% for an extended period of time before JBH’s business model comes under pressure. Australian music sales are yet to be released but are expected to be strong.
Austal (ASB) down 3c to 323c. There was a long article in the Wall St Journal on the stock overnight talking about the progress with the US Navy’s Littoral Combat Ship program (worth $15bn for 55 ships). The program has had cost over-runs and the ASB share price has fallen on concerns of the program being changed. The US Navy have since recommitted to the LCS program albeit at a slower pace. A few brokers this morning called it as buy.
Qantas (QAN) up 4c to 519c after the AFR reported that APA are talking to their bankers to see if they can drop the 90% acceptance condition in their bid for Qantas. Their debt funding cost would rise (costing an extra $200m) and the suggestion is that the board would reject the dropping of the 90% condition.