Morning Market Report, Nov 12, 2007

The market is down 37. The ASX 200 Futures suggested a 78 point fall in the market. The market opened down about 40 and has rallied and dipped again. The main driver was an early 13% jump in RIO (now up 9.2%) on talk that BHP are going to have to pay a lot more than the $129 they initially proposed with talk of a $147 bid at least and some suggestions of a counterbid….(possibly even from the Chinese) at prices up to $200. Now $143. RIO has added 23 points to the ASX 200 on its own. Wesfarmers having a bit of a bounce today after a near 12% fall last week.

The Dow Jones finished down 223 on Friday – It moved in a 245 point range and finished lower for the third consecutive session after major banks warned that the credit crunch is far from over and that further subprime mortgage losses are likely. The financial sector was punished again after Bank of America Corp., JPMorgan Chase & Co. and Wachovia Corp (who is facing $1.1bn worth of writedowns for October alone) all said the ongoing credit crisis could result 4th Q earnings coming in lower than expected. Investors also became nervous on speculation that Barclays was about to announce a $10bn writedown. In other news, Qualcomm fell 4.2% after lowering it profit guidance for 2008, Target dropped 4% thanks to Bear Stearns lowering its earnings forecasts and Fannie Mae finished lower after saying mortgage-related losses had increased. All three major indexes tumbled last week, the Dow Jones lost just over 4%, now 8.1% off its record high reached in August. The S&P 500 fell 3.71% and the NASDAQ dropped a big 6.49%.

Resources struggling today except for RIO, up 9.2% this morning adding to its 15.4% gain on Friday, up 1207c to 14296c. BHP on the other hand is down 71c to 4176c on expectations they will have to pay up and on talk that they have arranged US$70bn of financing from Citibank. Metals mostly down on Friday, Copper down 2.4%, Zinc down 1.8% and Aluminium 0.8%. Nickel up 3.2%. Zinifex down 20c to 1525c. Oil price up 85c to $96.36 despite concerns about the global economy slowing down. Woodside down 104c to 5430c. Gold down $2.80. Newcrest down 20c to 3565c.

Bit quieter this week than last…The talk of the town is still the BHP proposed bid for RIO. We wait for any developments on that. See article in the newsletter on it this morning. We have the RBA’s Quarterly Statement on monetary policy due out this morning and Wesfarmers starts trading this morning including Coles (WES up 65c to 3880c), Coles has been suspended from trading as of Friday night. Macquarie Group (the old Macquarie Bank) has interim results on Friday, Woodside have an investor briefing on Thursday and the head of BHP’s iron ore operations gives a breakfast talk on Friday. There are also still plenty of AGM’s going on, main ones include: Wesfarmers, IAG, Qantas, Bluescope (chance of a currency related profit warning), Seven Network, Lend Lease, Woolworths and Brambles (another currency impacted stock).

The RBA statement on monetary policy is out. Tends to suggest the RBA still have a tightening bias with talk that we are likely to see another rate rise in February to 7.0% but perhaps not in December any more. The A$ has dropped a touch in reaction.
Orica (ORI) has announced a 31% increase in FY profit this morning in line with expectations and largely thanks to the performance of its mining services division (EBIT up 38% – Asia and Australia strong, US and Europe not as good as expected). Share price down 1% to 2911c.
Computershare is up 3.5% this morning to 975c on positive earnings guidance. Guidance has been raised from “more than 15%” growth to “greater than 30%”. Consensus was for 18-20%. CPU up 29c to 970c.
Flight Centre went into a trading halt on Friday pending a US acquisition and $100m capital raising and institutional placement (being done today). They have announced this morning that they have acquired Liberty Travel in the US for $135m (6.8x) forming the second largest chain of travel agents in the US and 10th largest travel agent overall. Stock is down 76c to 2648c.
Lots of broker stuff on both the National Australia Bank (NAB) and West Australian Newspapers (WAN) this morning after earnings numbers on Friday. The NAB impressed with theirs while WAN’s came in a little flat. WAN down 27c to 1272c.
Merrill Lynch cut their target price on Brambles (BXB) to 1321c from 1450c despite maintaining their Buy recommendation saying “investors are getting a free option” on either a takeover bid or turnaround in European CHEP business. BXB down 32c to 1198c, TOL up 19c to 1327c and AIO down 8c to 882c.
Slater & Gordon (SGH) announced this morning that Telstra (TLS) has agreed to pay $5m to settle an out of court shareholder class action brought against them. TLS unchanged at 468c.
James Hardie (JHX) getting some support today, up 6c to 619c after Perpetual (PPT) upped its substantial shareholding in it to 8.06% from 7.03%. JHX down 23% in the past year.
Xstrata has become a substantial shareholder in bid target Jubilee Mines with 15.72%.
Mincor is down 3.6% on its AGM statement.
Uranium stocks taking a beating today. Paladin down 4.1% and ERA down 4.6%. Others down as well. Uranium price looks OK. May be some reaction to the prospect of BHP becoming the biggest uranium producer if it buys RIO.
Macquarie Group (MQG) running today ahead of interim results on Friday. Usually good news.
Mincor holds its AGM today. MCR down 13c to 462c.
Companies going ex-dividend include BKW, CGJ, CLH, DGH, ESV, JYC, MNY, TFC and WAT.