Morning Market Report, Sep 25, 2007

The market has been in and out of positive territory all morning – currently up 31. The SFE Futures suggested a 12 point fall in the market this morning.

The Dow Jones index fell 61 overnight – It moved in a 124 point range and finished lower despite starting the session strongly. Homebuilders struggled as Standard Pacific cut its dividend to reduce debt and financials retreated after the International Monetary Fund said credit markets may not “normalize” soon and there is talk that Deutsche Bank will take a big writedown on its loan book. AMR, the parent company of America Airlines, closed down 14% after their disappointing 3Q outlook resulted in a number of brokers cutting their profit estimates, and the energy sector finished lower on the back of a weaker oil price. The NASDAQ was down 0.1%. Microsoft up after The Wall Street Journal said they are considering taking a stake in social-networking startup Facebook. Microsoft’s executives have been busy organizing a campaign to oppose Google’s planned $3.1bn acquisition of DoubleClick. The news didn’t seem to worry Google, their shares closed in record territory once again. The stock has now finished higher nine of the last 10 sessions putting on 10% in the past fortnight.

Resources going great guns again today…BHP up 59c to 4373c and RIO up 222c to 10890c. BHP announced today the appointment of Graham Kerr as President of their Diamonds and Specialty Products Customer Sector Group. Metals all up overnight, Nickel up 2.4%, Copper up 1.9% and Zinc up 1.6%. Aluminium up 0.1%. Zinifex up 15c to 1765c. Oil price down 87c to $82.51 on the back of a tropical storm in the Gulf of Mexico not causing any damage to key oil and gas infrastructure. Woodside down 58c to 4961c. Were’s cut their recommendation on the stock to “hold” from “buy” purely based on valuation. Gold up 40c. Newcrest down 47c to 2792c. Lots of morning discussion about the resources breaking into Blue Sky yesterday with big rises to all time highs in BHP, RIO and Fortescue Metals. The mantra is “keep buying for the long term”.

Some positive broker talk this morning for Orica (ORI) after they announced yesterday the acquisition of Excel Mining in the US for A$775m. Merrill Lynch says the acquisition is “highly complementary”. They retain a NEUTRAL recommendation saying the mining services growth prospects are already factored into the price. The stock is up 40c to 2970c and 6% in the last week.
Sims Group (SGM) have announced a merger with US metal recycling company Metal Management. It is really a takeover of Metal Management. SGM will remain listed on the ASX and will now be ADR listed, they will end up with 70%, Metal Management with 30%. The combined group will be the largest listed metal recycler with an estimated market capitalisation of A$5.6bn with 200 operations globally. (Market capitalisation of SGM at the moment is $4.1bn) SGM say it will be mildly cash earnings accretive for the historical year to June 2007 with synergies of US$35m. They call it “building the worlds leading recycling company”. SGM up 121c or 3.6% to 3375c.
National Australia Bank (NAB) announced they have decided to sell their commercial vehicle leasing business to Super Group for $342m. NAB, who in May last year sold their Custom Fleet car leasing business to GE Commercial Finance for $550 million, said the offer is still subject to regulatory approval and some other conditions. There are also suggestions that the NAB are interested in bidding for Rams Home Loans – RHG up 16% yesterday. NAB looked at a trade sale of RHG before they listed and turned it down presumably on price. It listed at 250c two months ago – hit a low of 55c and jumped yesterday from 83c to 97c. Merrill Lynch recently had research out with a BUY recommendation and a 120c target price saying a “salvage value” was 82c. NAB down 17c to 3812c and RHG up 3c to 100c.
Tabcorp (TAH) and Tattersall’s (TTS) both falling over today on the media reports that horse flu in two thoroughbreds shut down racing in Brisbane yesterday. TTS down 3c to 392c and TAH down 17c to 1502c.
Publishing & Broadcasting (PBL) doing well today, up 43c to 1902c on news Foxtel is making its first capital return of $200m to its investors Telstra (50%), News (25%) and PBL (25%).
Last day to buy Sally Malay (SMY) ahead of its 12c dividend going ex tomorrow. The stock hit 285c in mid August in the correction. Now 492c….up 72% in a month.
BSM up 8% on delivery of its first ore to Zinifex’s Rosebery operation.
Companies going ex-dividend today – AEC, AED, AHE, XAM, CPR, GRT, ILY, LYL, STE, SIP. Tomorrow – RHC 16c, SMY 12c.