Morning Market Report, Oct 24, 2007

The market is up 70. The SFE Futures suggested a 34 point rise in the market this morning.

The Dow Jones had a good session overnight – up 109. It moved in a 144 point range and finished higher for the second consecutive session on the back of better-than-expected earnings results from several blue chips. American Express, DuPont and Apple Inc all beat analysts expectations, so did the New York Times, it closed up 10% after announcing a 6.7% increase in 3Q earnings on the back of higher-than-expected advertising revenue. According to Standard & Poor, around 41% of the S&P 500 have reported results thus far, 51% of them have topped expectations. Wal Mart was one of only three members of the Dow Industrials to finish lower, it fell 2.9% after lowering its forecasts for capital spending for the current year and saying it expects to spent even less money building new stores during the next two years. Texas Instruments also got sold heavily, down 8.3%, its biggest fall in 5 years after announcing their 3Q sales will fall short of Wall Street’s expectations. UBS cut their recommendation on the stock to “neutral” from “buy”. The NASDAQ had a great session; it put on 1.6% helped by Apple’s impressive result late yesterday and Research In Motion’s alliance with Alcatel-Lucent to distribute the BlackBerry e-mail phone in China.

Resources outperforming today…BHP up 54c to 4654c. Brokers this morning described BHP’s production numbers on average as disappointing. Happy with petroleum division but Nickel and Copper output not good.

RIO up 105c to 10750c. Metals mostly up overnight, Copper up 0.4%, Zinc up 1.1%, Nickel is unchanged and Aluminium down 0.2%. Zinifex up 3c to 1784c. Oil price down $1.15 to $86.45 on concerns over a continuing buildup of Turkish military forces along the northern Iraqi border. Woodside down 45c to 5185c. Gold up $3.10. Newcrest up 46c to 2940c.

Our market is doing well today on the back of Wall Streets positive session overnight. The US market has recovered well after five consecutive losing sessions last week including the big sell off on Friday on concerns the consequences of the credit market would cause further damage to the economy. The Dow has put on 153 points in past two sessions thanks to impressive earnings results from the likes of Apple, American Express, Walt Disney and Google.

It looks as if interest rates are on the way up when the RBA meet next month – While Australian 3Q CPI came in lower-than-expected, up 0.7%, the preferred measure, trimmed mean CPI measured up 1%, above the 0.8% expected. Some economists are even predicting further rate hikes early next year. Not good news for home owners.

ANZ Banking Group (ANZ) announce their FY profit result tomorrow – the numbers will be important but the market will be more interested in what new CEO Michael Smith has to say regarding the company’s business outlook and priorities. Analysts are expecting the focus will be on the banks Asian expansion plans and not so much on increasing their exposure to the domestic wealth management industry. ANZ’s best attempt to enter the sector was a joint venture with ING, which has left it well behind the other 3 major banks. JP Morgan tells us not to expect any nasty surprises. They maintained their Neutral recommendation and 3029c target price. ANZ up 20c to 3141c.
A few upgrades this morning for Woolworths (WOW) on the back of their sales numbers yesterday. They came in as expected. Although Macquarie liked the look of them, they maintained their Underperform recommendation saying the stock looks expensive. They expect the revamped Big W to be a success and that stores could double as the brand becomes more relevant to consumers. WOW down 11c to 3263c.
Transfield Services (TSE) up another 5.5% to 1555c after telling shareholders at the AGM that it expects record earnings growth to continue. It was only this morning that UBS cut their recommendation on TSE to Neutral from Buy due to the recent share price appreciation. The stocks in up 10% in the last week and 50% in the past 2 months. They expect TSE to make acquisitions in the highly fragmented and high-margin U.S. market and grow its business there organically. They have a 1474c target price. Were’s also said it was one company on the ASX most at risk of earnings downgrades.
Bank of Queensland (BOQ) announced this morning an important condition for their planned merger with Home Building Society has been met. BOQ is offering HBS shareholders 0.844 new BOQ shares and 280c cash per share.
According to New Zealand’s Domonion Post, Boral (BLD) and NZ’s Fletcher Building will bid for assets of Carter Holt Harvey that are being sold to Graeme Hart. The paper reported Fletcher Building will buy most of the NZ assets and BLD will acquire the Australian unit in a deal worth around $1.69bn. BLD up 7c today to 718c.
Perilya’s (PEM) production numbers are out – zinc output of 35,700 tons for the quarter and believes in can achieve 120,000-140,000 tons of contained zinc for the FY. PEM up 1c to 384c.
JP Morgan believes Ten Network (TEN) will announce EBIT of $230.9m and a capital management initiative at their AGM tomorrow. Maintaining their Neutral recommendation on the stock, they believe it has the capacity to undertake a buyback of around $700m-$975m and also expects a 4.8% increase in TV revenue to $801.5m. TEN up 3c to 288c.
Healthscope’s (HSP) Chairman has told investors that the company’s performance in the most recent quarter had been satisfactory. He didn’t provide any FY outlook because of the issues associated with the potential acquisition of Symbion (SYB). HSP up 6c to 542c.
PMC goes ex-dividend today 10c.
Companies holding their AGM’s include Virgin, Transfield Services, Amcor, Biota and Super Cheap Auto.