Morning Market Report, Jun 20, 2007

The market is up 5. The SFE Futures suggested a 9 point rise in the market this morning.

The Dow Jones closed up 22 and moved in a relatively narrow 75 point range and closed up on the back of declining bond yields and takeover activity. Regency Energy Partners, a natural gas processor and distributor, finished 19% higher after General Electric announced it would pay $603m to buy a majority stake in the company. The Commerce Department announced that construction of new houses and apartments fell 2.1% to 1.47m in May, and in company news Best Buys finished 5.9% lower after it announced an 18% fall in NPAT on the back of lower sales. The NASDAQ had a quiet session and closed unchanged; Yahoo Inc. fell after one analyst said the company was less likely to be taken over now that co-founder Jerry Yang is chief executive.

Resources mixed today…BHP down 36c to 3455c and RIO down 140c to 9970c. Alcan is trying to find a White Knight to create a bit of tension after their $27bn bid from Alcoa. They have opened a data room and both BHP and RIO are having a look. Regulatory problems and the hunt for another interested party suggest a Coles Group type timeline for the bid…LONG. Metals down overnight. Zinc down 2.1%, Copper down 1.5% and Nickel down a big 7.7%. Aluminium was unchanged. Zinifex down 31c to 1910c. Oil price up 9c to $69.15 after labour unions in Nigeria rejected government’s wishes to abandon a nationwide strike. Woodside down 24c to 4661c. Gold up $4.80. Newcrest up 5c to 2406c.

The market staged a remarkable 60 point intra-day turnaround yesterday from 1.30pm into the close mainly on the back of rumours the Future Fund had began to invest its $52bn and on John Howard responding to a question in parliament regarding the resource sector and replying “If we pursue the right domestic policy, there is no reason why the resources boom shouldn’t continue for years into the future”. As far as the Future fund is concerned, don’t bother trying to guess which stocks they will buy in our market. They will farm the money out to fund managers who will then buy a spread of mostly larger stocks. Don’t try and guess which… its all the big ones. It is a useful cash flow for the market of course. July is usually a good month. If the FF is getting involved and the new Super money gets invested… doubly so. The market is doing something similar today. Down 25 early on and now up 5.

Nickel stocks getting wracked today after another big fall in the Nickel price overnight. There is talk of Chinese buyers cutting back on deliveries and in some cases cancelling orders, European cutbacks in stainless steel production, reduced demand for scrap, falling demand for high grade steel and stocks being delivered into the LME warehouses. See nickel stocks below.

The AFR has reported this morning that RAMS Home Loans founder, John Kinghorn is considering floating the company after failing to reach an agreement with private equity groups. He has appointed UBS to oversee the IPO process…he could well be Australia’s newest billionaire.
Energy Resources (ERA) up 108c to 2220c or 5.21% on the back of broker upgrades this morning. They fell 12% last week after announcing flood damage to their Jabiru pit and production delays. ABN AMRO upped their target price to $26 today and have a BUY recommendation.
Bid stories on Woodside seem to have peaked. Down 25c to 4660c. Up 10% from 4246c in a couple of weeks.
The Iron Ore price is now up 24% in the past 5 months with China accounting for 43% of the world imports. Murchison Metals was up 24.8% yesterday as Mitsubishi bought into 50% of one of the projects. Gindalbie Metals is up from 93c on Friday to 100c after Ansteel took a 13% stake at 60c. Fortescue is raising $1bn to double production in response to customer demand. Everyone wants in on iron ore.
Ten Network (TEN) is holding up a bit better after announcing late yesterday that majority shareholder CanWest was planning on keeping its stake in company. TEN down 5c to 289c. They have announced 3 Q results this morning. Earnings up 20% on a recovery in the advertising market.
ANZ have published a presentation today from the MD of their Personal Division – it is a bit of a run down of their progress in Retail Banking on brand, customers and staff. Not terribly price sensitive. They are at the UBS FIG Conference. The Commonwealth Bank have also put out a presentation as well which is pretty upbeat.
UBS Warburg have a “Buy” recommendation on Western Areas (WSA) saying their $225m convertible bond raising should result in them stepping up work on their Western Australian projects. Their main project is the Flying Fox mine in Forrestania which began production late last year. WSA down 15c to 516c. It was 620c earlier this month.
Leighton Holdings (LEI) have announced a Melbourne $116m Dynon port rail contract this morning. They have $6bn of work-in-hand. They have also announced that a consortium including LEI and ABN AMRO have acquired the Sydney Cross City Tunnel from its receivers for $700m. LEI down 38c to 4450c.
Lend Lease (LCC) down 34c to 1896c despite announcing a US$400m Defence housing contract for the US Air Force in Hawaii.
Wilson HTM (WIG) up today another 9c or 2.64% to 350c after listing at a 70% premium yesterday to close at 341c. Their market cap is now $307m compared to $191.4m at issue price. They are forecasting 2007 revenues of $115.9m and a NPAT of $13.9m. PE 22x.