Morning Market Report, Oct 22, 2007

The market is down a big 147. The SFE Futures predicted a 155 point fall in the market this morning on the back of heavy losses from Wall Street on Friday. The market is concerned of a US recession after Caterpillar warned that the US housing downturn was spreading to other parts of the economy and financial group Wachovia said it sees more credit troubles ahead.

The Dow Jones was down 366 on Friday – It moved in a 377 point range and finished 2.7% lower on Friday – the 20th anniversary of the 1987 crash – on the back disappointing earnings results and growing concerns that the credit market will continue to hurt the economy. Wachovia, Caterpillar and Honeywell International all disappointed with their earnings results. Google gained despite the NASDAQ losing 2.6%, four brokers upped their recommendations and target price on the stock after it announced a better-than-expected 46% increase in earnings after the market closed on Thursday. The Financial Index, which has dropped over 10% this year, fell 3% on Friday, its biggest fall since late August, and according to Bloomberg, around thirty of the 92 financial companies have announced 3Q results, and their 17% average earnings fall is the biggest in ten years. The banks have been struggling; profit at the 5 biggest US banks has totaled $18.7bn, the lowest in four years due mostly to losses on bad loans. It was a negative week for all three major indexes, the Dow Jones fell 4.1%, the S&P 500 lost 3.9% and the NASDAQ 2.9%. The Dow closed lower in all five sessions last week.

Lots of red today…

AGL Energy has wasted no time forcing out MD and Chief Executive Paul Anthony and replacing him with senior AGL executive Michael Fraser in the wake of last weeks profit downgrade. Fraser is AGK’s fourth chief executive in less than 2 years. AGK down 19% in the past week but outperforming today, down only 10c to 1295c.
There is a report in the AFR that Woolworths (WOW) is planning on makeover of Big W to pump us sales and extend its lead over rivals – new store format, new slogan, new brand and improved merchandising are all on the way. Woolies announce sales for the 3 months ended September tomorrow. Citigroup on average are expecting a expecting them to report 1Q sales growth of 9.5% to $11.72bn saying “We expect very strong sales from Big W and Consumer Electronics and forecast comparable store sales growth of 8.5% and 8% respectively.” WOW down 65c to 3197c.
Computershare (CPU) down 14c to 881c, they announced another acquisition this morning. They will pay $US32m for US based Administrator Services Group subject to certain hurdles being met. UBS Warburg upped their recommendation to Buy from Neutral and maintained their 1125c target price on Computershare (CPU) after reviewing its performance and growth prospects. They expect CPU announce EPS growth of “at least 15%” and believe that target is very achievable.
Babcock & Brown (BNB) down 96c or 3.5% to 2677c – they have acquired a stake in Thailand’s Don Muang Tollway for between $110m and $130m. It is an unlisted tollway which operates a 21km elevated tollway from the centre of Bangkok to their northern suburbs. The deal is expected to be finalized later next month.
Brambles only down 15c today to 1366c on talk that Asciano (AIO) has secured a credit rating to help it get debt funding, increasing the likelihood of a bid for BXB. AFR’s Street Talk also suggests Toll Holdings as another potential bidder after Paul Little expressed interest in the company a little while back. AIO down 29c to 848c and TOL also down 36c to 1347c.
Goodman Fielder (GFF) getting flogged this morning – down 6.3% to 209c after Graeme Hart announced on Friday he would be selling his 20% stake in the company. This is despite some brokers saying the fact that Hart sold his stake is a positive as it frees up GFF to raise capital and look for acquisitions.
Wotif and Austal both have their AGM’s today.
Companies going ex-dividend today include – AHC and OMH.