Morning Market Report, May 14, 2007

The market is up 48. The SFE Futures suggest a 55 point rise in the market this morning.

The Dow Jones was up 111 on Friday – It moved in a 121 point range and closed higher on the back of takeover activity and positive economic news as well as easing inflation worries after producer prices came in as expected, unchanged from last month. In takeover news, Alcoa gained 6.7%, the biggest rise in the Dow Jones after it offered $26.9bn for Alcan Inc. (up 31%) and Countrywide Financial Corp. closed up 8.1% on talk that it would soon be bid for. Amazingly, there have been $936bn worth of announced takeovers involving US companies this year. The Dow Jones made up most of its losses from Thursday’s session and closed higher for the sixth consecutive week, its longest stretch of gains since 2004. The NASDAQ had a good session closing 1.2% higher.

Resources doing well today…BHP up 47c to 3147c and RIO up 163c to 9363c. Metals all up on Friday, Nickel and Zinc both up 1%, Zinifex up 11c to 1808c. Aluminium up 1.3% and Copper up 0.1%. Oil price up 50c to $62.35 after a report from the International Energy Agency increased concerns about the market’s ability to meet an expected jump in demand for oil-based products. Woodside up 99c to 4334c. Gold up $5.30. Newcrest up 16c to 2296c.

Our market has followed the lead from the Dow Jones on Friday and is currently up 1%. The market has made up most of its losses from Friday (was down 58) with resources and healthcare stocks doing the job. David Murray will give a talk on Wednesday on the status of the Future Fund, a potentially huge cash flow for the markets.

Santos (STO) up 66c or 5.3% to 1291c this morning after announcing a $300m off-market buyback. It will be funded by debt – typical takeover defence play. The SA Government have just announced of course that they are re-visiting the 28 year old 15% shareholder cap — they are likely to deem it “inappropriate” in September making Santos a potential bid target.
Leighton Holdings (LEI) up 180c or 4.75% to 3970c on the back of a $273m profit in the first 9 months of fiscal 2007 (up 62%) and a raised full-year profit growth forecast of a staggering 55%. Analysts were expecting FY NPAT to increase by 47% to around $406m. Its shares are up 50% since 14 February when it announced a 61% increase in 1H profit to $190m.
Just Group (JST) CEO Jason Murray was in the AFR this morning and has put out an official announcement denying the suggestion on Friday that the Just Group would follow Specialty Fashion Group, Noni B and Colorado with a “Fashion” related profit downgrade. He says things are “pretty solid” and the recent speculation was “inappropriately negative”. JST up 21c or 5.3% to 415c. It was down from 472c to 390c in the last month.
Perpetual Trustees (PPT) up 80c to 8095c after announcing Funds Under Management were up 3.1% in April which has beaten some brokers expectations. They have a Chairman’s letter due out on 30 May and the suggestion is that that is more likely to upgrade 2007 expectations than damage them.
Fortescue Metals (FMG) up 6.7% to 3118c breaking the 3000c barrier for the first time. Unbelievable to think it has a market cap of $8.3bn and is yet to begin production. One broker this month visited their operations in WA, saw the scale of construction and declared FMG as a $100 stock.
Uranium Exploration (UXA) is up 10% to 40c on a deal with Newcrest this morning. There is a uranium conference in Darwin this week by the way.
ANZ Bank (ANZ) is ex dividend today, down 50c to 2993c. Westpac goes ex dividend 63c on Thursday.
UBS have upgraded their BHP target price from $36 to $40. They have done it on the back of a long term nickel price upgraded from US$4.50/lb to US$7/lb. They say the “long term prospects are well supported”. Despite that they still say that base metal prices are trading at higher than expected prices they “suspect that there could be a near-term correction over the next few months”. They go on to say that if it happens it could be a good opportunity to buy BHP. They also have research out on nickel stock Minara (MRE) upping their target price from 850c to 1050c. They have a NEUTRAL recommendation.