Morning Market Report, Oct 19, 2007

The market is finishing the week in a negative mood – down 67. The SFE Futures suggested a 21 point fall in the market this morning.

The Dow Jones down 3.5 – It moved in a 93 point range and finished lower for the fourth consecutive session on the back of disappointing earnings results and concerns that the credit crisis is hurting the economy. Financials closed down after Bank of America disappointing investors with their 3Q earnings result; they announced a 32% fall in earnings and higher credit-loss provisions due “significant dislocations” in the capital markets. Around 60 companies belonging to the S&P 500 index have reported quarterly earnings thus far with Wall Street mostly concentrating on what effects the credit crunch had on earnings in the 3Q, some of the bigger banks such as Citigroup and Washington Mutual have disappointed with their results due to write-downs from leveraged loans, consumer credit and mortgages. The NASDAQ gained for the eighth time in 11 sessions, Google announced after the close of trade a better-than-expected 46% increase in the 3Q. The result helped the market recover after being down as much as 70 in early trade, one market analyst said it was no coincidence that the “market improved as we got closer to Google’s profit result”.

Resources struggling…BHP down 72c to 4698c, a little surprising considering it was up 3% in ADR form overnight. It had a big day yesterday – it added $5bn to its market cap after CEO Marius Kloppers forecasts double-digit production growth in FY08 and said supply and demand are very tight across all their products. RIO down 248c to 11035c. It received approval for their takeover of Alcan from the Canadian Industry Minister Jim Prentice. Metals mixed overnight, Nickel up 2.2%, Aluminium up 1.6%, Zinc down 0.2% and Copper down 1.3%. Zinifex down 25c to 1773c. Oil price up $2.29 to $89.48 on concerns Turkey will use military force against Kurdish rebels in Northern Iraq and disrupt oil supplies. It is the fourth record close in five trading sessions. Woodside down 47c to 5503c. Merrill Lynch has cut their 2009 net profit estimates on WPL by 5% after production numbers yesterday. They now expect WPL to downgrade their 2008 production guidance but maintained their Neutral recommendation. Gold up $6.40. Newcrest up 27c to 2881c.

Lots of company related stuff going on today…

Wesfarmers (WES) has obtained the services of UK retail executive Archie Norman in an advisory role at Coles Group. He will oversee Coles’ food, liquor and convenience businesses once the takeover goes ahead. The market is divided on whether WES will succeed post Coles. The bulls say it’s no fluke that they own and operate Bunnings, the third biggest retailer in the country, the bears say Coles is a different beast altogether. WES up 2c to 4338c.
Iluka (ILU) has lowered its 2007 earnings guidance due to tight shipping markets and the strong Aussie. It now expects to announce a profit of between $45m and $50m instead of $55m-$60m. ILU down 20c today to 493c.
PBL released scheme documents yesterday indicating they are conducting due diligence on a few gaming businesses “outside of Australia” meaning Sky City is not on their radar contrary to recent media speculation. According to Credit Suisse, the Crown Gaming business to be split out of PBL is the best pick in the gaming sector. They expect Macau to be profitable by 2H08 and Burswood to provide EPS growth in the near future. Crown Gaming is expected to start trading in mid December. PBL down 30c to 2013c.
There is talk that Flight Centre (FLT) is looking for acquisitions in the US, India and UK. Today’s AFR tells us the company could raise up to $100m to fund the moves. FLT up 85% in the past year.
CSL doing well this morning, up 58c or 1.7% to 3490c after its major competitor Baxter, announced a better-than-expected 3Q profit result in the US overnight and upped its FY earnings guidance.
AWB Ltd (AWB) flying, up 9% to 252c after upping their profit guidance to $80m-$90m. Timely announcement for shareholders, the stock has halved in price in the last quarter and hit an all-time low of 223c in October.
Graeme Hart is selling down his 20% stake in Goodman Fielder (GFF). GFF requested a trading halt yesterday, the market will be waiting to see what the NZ billionaire decides to do with the money. GFF last traded at 223c valuing Hart’s stake at around $590m.
Companies going ex dividend today include – FXI, LCL and SYL.