The market is up a huge 161. The SFE Futures suggested a 65 point rise in the market this morning. 30 points of the rise is thanks to a 6% rise in BHP on the back of tis results yesterday. 10 points is thanks to RIO which managed to raise $40bn overnight in a syndicated loan to finance the Alcan acquisition….a sign that the banks are happy with their strategy and the commodities cycle.
The All Ords is now just 4.7% off its old highs having bounced 8.6% off its closing lows.
The Dow Jones closed up 145 – It moved in a 161 point range and finished higher for third time in four sessions on renewed confidence in credit markets and speculation that mergers and acquisition activity would soon be back. Four of the country’s biggest banks, Citigroup, JPMorgan Chase & Co., Bank of America and Wachovia Corp. provided the market with confidence after announcing they each borrowed $500m from the Federal Reserve’s discount window. In takeover activity, Rio Tinto finished 6% higher after saying they could now close their loan syndication to fund their $38bn takeover of Alcan Inc., and Nymex Holdings Inc’s boss said the company was meeting with potential bidders. The housing sector continues to struggle, luxury homebuilder Toll Brothers announced an expected fall in 3Q profit and provided little to suggest the housing market would recover. Both the NASDAQ and the S&P 500 closed up 1.2%, Apple Inc. put on another 3% after the Financial Times reported the company had signed exclusive distribution agreements with three mobile-phone operators in Europe.
Resources going gangbusters…BHP up 218c or 6.2% to 3758c on the back of their record breaking profit result out yesterday. The results were in line with expectations with a better dividend than expected but no capital amangement initiative. They have had a good write up from most brokers this morning. Target prices go up to $45 and the worst recommendation is from Merrill Lynch who have a NEUTRAL recommendation but say it is a core holding in any portfolio. Charlie Aitken at Southern Cross Equities says “If you are shorting great Australian companies on U.S. subprime issues you have a death wish”. BHP was up 3.45% in ADR form overnight and 4.9% in the UK. RIO is also flying, up 552c or 6.5% to 9095c after financing their acquisition of Alcan, their shares were up 6% both in ADR form and in the UK.
Metals all up overnight, Copper up 2.4%, Nickel up 3.4% and Zinc up 3.5%. Aluminium up 1.5%. Zinifex up 87c to 1687c. Oil price down 19c to $69.30, an eight week low after the Energy Department announced an unexpected increase in inventories. Stockpiles increased by 1.89m barrels to 337.1m during the week, much higher then the 2.75m barrels expected. Woodside up 97c to 4196c. Citigroup upped their recommendation to BUY from HOLD on the back of their strong profit result. They also upped their target price to 4700c from 4620c. Gold up $2.50. Newcrest up 57c to 2568c.
A heap of companies reporting today…
- Good result from Aristocrat Leisure (ALL) with Net profit for 1H07 up 20% to $126.15m from $101.8m last year. The result was slightly better than analysts’ expectations of between $120m and $125m. Hasn’t done much for the share price, down 43c to day to 1290c and performed OK in 2007, up 6%.
- AMP Ltd (AMP) flying after releasing a better-than-expected profit result, up 24c to 1009c – 1H07 profit up 27% to $534m from $420m in 2006, Analysts were expecting $474m. Chief Executive Andrew Mohl has decided to leave the company after 11 years, Chairman Peter Mason said the company will look internally and externally for a replacement. AMP has had four straight years of double-digit returns – up 11% in the past 12 months.
- Oxiana (OXR) up 15c to 344c – 1H07 NPAT down 34% due to lower gold production and higher Aussie dollar. Profit of $172.7m compared to $263.3m last year, analysts were expecting a profit before significant items of $208m. MD Owen Hegarty sees “strong second half ahead”, the stock has been a phenomenal performer over the last 5 years. (Market cap of $20m in 2000 compared to $5bn in 2007)
- Babcock and Brown (BNB) have done what they needed to do with a great set of interim results this morning. They have made $250m up 53% against forecasts of $242m and some down to $223m. They have also upped their full year profit guidance today to 30% growth from 20%. They were up 7% ahead of the results and are now up 15% on the day…..but they are still 34% off their year high before the recent correction.
- Tabcorp Holdings (TAH) have announce shocking results, the management team labeled them unacceptable. FY07 NPAT down 3.8% to $515m compared to $535.8m last year, analysts had expected $517.7m. New CEO Funke Kupper says the company has a challenging year ahead. TAH up 4.6% in the past 12 months compared to an 18.3% increase in the market.
- Sonic Healthcare (SHL) also announced results – FY07 NPAT of $198m, up from $172m last year, analysts were expecting $197.1m. The expects EPS to grow by at least 12% in 2008 depending on macroeconomic factors. SHL up 30% in the last 12 months and going strong.
The main message today is the renewed confidence in resources and the dwindling concerns about the correction….”What correction” said one dealer in the morning meeting this morning. Some of the resources stocks are flying….and the announcements are starting to come back in the smaller resources and [prices are being moved. Surely we can’t be regaining irrational exuberance already. Exuberance even. Just not feeling bad would be good.
You might like to know that in order to regain their old highs, despite the recent rally, Macquarie Bank would have to rise another 24%, Babcock & Brown 38%, Paladin 67%, Zinifex 26%, Fortescue 35%, BHP 6% and RIO 15%. For a full list go to the Marcus Today newsletter today. Plenty of opportunity for the optimist. We list there the “bounce potential” in the ASX 100 stocks and the ASX 300 Resources sector. We also run through the BHP results and the research comments.
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