Morning Market Report, Sep 27, 2007

The market is up 61. The SFE Futures suggested a 42 point rise in the market this morning.

The Dow Jones finished up 99 – It moved in a 136 point range and finished higher after General Motors agreed to a new contract with the United Auto Workers and on talk that Warren Buffett is set to buy a stake in Bear Stearns. In what would be a vote in confidence for the financial sector, The New York Times reported that Bear Stearns was having “serious talks” with numerous outside investors to sell 20% of the company and mentioned Buffett as a potential suitor. Financials rallied on the back of the news but homebuilders struggled, the Mortgage Bankers Association said mortgage applications in the US fell 2.8% last week, the most in 9 months. Auto makers and auto-parts suppliers finished higher as a result of General Motors agreeing to a new deal with the UAW that could result in the company operating with a cost structure similar to that of its Japanese competitors. The stock put on 9.4% as its workers agreed to return back to work after a two day nationwide strike. The rise in the Dow index was helped by record closes from Procter & Gamble, 3M and United Technologies. AT&T nearly hit a 6 year high and Coca-Cola closed at its highest level in 5 years. The NASDAQ closed up 0.6%.

Resources doing OK today…BHP up 7c to 4323c and RIO down 20c to 10580c. Both stocks are up 15% in the last month. Metals mixed overnight, Copper down 2% and Nickel down 0.3%. Zinc up 2% and Aluminium up 0.7%. Zinifex up 30c to 1799c. Oil price down 89c to $80.31 after the Energy Department said crude inventories increased by 1.8m barrels last week. Analysts had expected a fall of 2m barrels. Woodside (WPL) up 46c to 4912c, they have decided to sell their interest in Mauritania to PETRONAS, a Malaysian state-owned oil and gas company for $418m. Gold down $3.30. Newcrest up 74c to 2915c.

The market is continuing its good form and is up another 1% today. We have seen big gains (+5% or +300 pts) in the past 6 sessions pushing that have pushed the market up 14.5% (830pts) since Aug 17. If there are no nasty surprises tomorrow, we could see the ASX 200 index close higher for a 5^th consecutive quarter. It has put on a 35.4% over the last 5 quarters but the rate of gains is slowing. It was up 5.74% in the Dec quarter, then 4.67% and now 3.41%. Financials performing strongly after their US counterparts had a good session overnight, BNB up 102c or 4% to 2753c.

Macquarie Bank (MBL) up 2.7% to 8242c after announcing this morning they have agreed to buy Orion, a Canadian investment and brokerage firm for $146m. MBL will be looking for economies of scope and scale when they integrate the company into their existing Canadian investment banking business. The deal will involve MBL paying $30m Canadian cash and offering 1.6595m in exchangeable shares. The stock is having a good day today but is still 17% off its all time high reached back in May.
Energy Resources of Australia (ERA) up 72c or 4.2% to 1804c after announcing this morning they plan to extend their Rangers Uranium mine in the Northern Territory to boost the mine’s life and reserves. They expect the expansion to cost around $57m and hope the pushback of the pit with expend the mining at the site out to 2012 as oppose to 2009 without the pushback. The stock is up 46% this year.
The broker commentary on David Jones (DJS) this morning was all positive after they announced their solid profit result yesterday. Merrill Lynch maintained their “Buy” recommendation and labeled the result “outstanding” and saying “We believe David Jones has a wonderful management team operating in a materially improved industry,” They maintained their 600c target price and are confident in the company achieving long term earnings growth.
Unwired (UNW) up 2.5c to 50c after receiving a 45c takeover offer from Seven Network (SEV). UNW’s board has recommended the offer to shareholders which will be increased to 50c if SEV reaches 90% ownership of the company before an unspecified date. SEV up 28c to 1340c.
Fortescue Metals (FMG) continues to hit record highs; up 140c to 4990c. Merrill Lynch said overnight that a 2008 iron ore contract price rise of 50% is “not unrealistic” and that the supply/demand outlook is tighter than in 2005 when contract prices rose 71.5%. FMG is now a top 50 stock yet surprisingly enough none of the major brokers cover the stock.
Commander Communications (CDR) down 0.5c to 62c, AAPT CEO Paul Broad telling the Sydney Morning Herald he’s still interested in the company after running the numbers over it last year hasn’t done much good for the stock today. CDR has been a real stinker this year, down 59% in the last 3 months.
Seems like the market doesn’t like the idea of Coca-Cola Amatil (CCL) acquiring Golden Circle. CCL made an unconditional offer for it late yesterday which Macquarie Research Equities say is likely to be in excess of $200m. Brokers are questioning why CCL are exposing themselves to what they believe to be “unattractive categories with low brand power and margins”. CCL down 26c or 2.7% to 924c.
Merrill Lynch has cut their recommendation on RAMS Home Loans (RHG) to “Neutral” from “Buy” saying although the risks associated with the stock have improved over the last few days, the recent rally in the share price no longer justifies a “Buy” recommendation. RHG down 2c to 96.5c.
Australian job vacancies are up 2.9% in the last quarter, down from the 4.5% rise seen in the previous quarter. Economists had predicted a 1% rise.
Companies going ex-dividend include: – CDM, DVN, HHV, AUB, MCK, NPX, PMP, SGM, SSM, TGR.