Morning Market Report

The market is finishing the week strongly – up 48. The SFE Futures suggested a 55 point rise in the market this morning.

The Dow Jones had another strong session – up 174 – It moved in a 206 point range and finished nearly 200 points higher for the second consecutive session after the government confirmed plans to assist homeowners with their mortgages. The financial sector put on a much needed 2.6% after President George Bush said some borrowers will be able to refinance or freeze interest rates on adjustable-rate loans. The announcement came on the same day the Mortgage Bankers Association said foreclosures hit a record high in the 3rd Q and the Royal Bank of Scotland – UK’s second largest bank – announced it had suffered $3bn in writedowns due to the credit crisis.

Resources doing OK. BHP up 33c to 4371c and RIO down 159c to 14315c. Rio Tinto (RIO) CEO Tom Albanese has labelled BHP Billiton’s (BHP) approach as “dead in the water”. He told the newswires that value is a huge issue but didn’t mention whether RIO’s shareholders would entertain the bid or whether he has held talk with BHP. He recently commented that the bid was a “couple of ballparks away” in terms of value. Metals mixed overnight, Copper up 0.4% and Nickel up 0.6%. Zinc down 0.5% and Aluminium down 0.7%. Zinifex up 27c to 1592c. Oil price up $2.80 to $90.25 on the back of tough administration talk on Iran and speculation the Chinese economy will continue to grow at record levels. Woodside up 62c to 4832c. Gold up $3.40. Newcrest up 1c to 3253c. Deutsche Bank maintain their HOLD recommendation on Newcrest (NCM). They expect the Cadia Hill pit and Ridgeway mine to hit production guidance for FY08. They have a 3180c target price based on a NPV multiple of 2.5x.

• Equinox (EQN) is flying this morning after closing up 16% on the Toronto Stock Exchange overnight. Quantum Minerals revealed it has a 17.27% stake, some say it makes sense for them to have a crack at EQN, others say it could be a blocking stake. Credit Suisse say EQN is the standout among the resources stock they cover. They say, “A buyer of EQN now would be getting Lumwana for an excellent price and EQN’s considerable upside for free”. They have an OUTPERFORM recommendation and 875c target price. The rumour yesterday was a bid from Oxiana. Up another 8.8% or 49c to 608c.
• Murchison Metals (MMX) down 4% as Midwest Corporation (MIS) confirm they are in talks with other parties. MMX is bidding for MIS and the concern is that they will now have to pay up. They are offering 1 MMX for 1.08 MIS worth 338c per share. MIS now 482c. Talk of a 600c bid from Sinosteel.
• According to the Sydney Morning Herald , Telstra CEO Sol Trujillo believes Consolidated Media Holdings (CMJ) or PBLDA has “intriguing assets”. Asked whether he was interested in them, Sol said he doesn’t talk about future plans because it might result in him having to pay a higher price. PBLDA up 1c to 419c.
• Hills Industries (HIL) announced it will merge its antenna and TV systems business with BSA Ltd (BSA). HIL down 5c to 593c and BSA up 10c to 78c.
• Billabong (BBG) has acquired Tigerlily, the swimwear and apparel business, from founder Jodhi Meares. It is an exclusive female brand with a strong focus on swimwear. Meares will continue to have an active role in the business. BBG expects Tigerlily to contribute less than 1% to sales in its first FY. Handy pick as BBG does not have an exclusive female brand. Were’s estimates the acquisition cost is around 1x sales or $10m and maintain their HOLD recommendation. BBG up 5c to 1475c.
• Macquarie Equities have reviewed their “investment fundamentals” on Sally Malay (SMY) and maintain their OUTPERFORM and 550c target price. The say the key growth driver is expected to be development of the Deacon deposit at Lanfranchi. They also say that “we are growing cautiously optimistic on the outlook for nickel in 2008.”
• ConnectEast (CEU) down 3.3% to 163.5c after Transurban (TCL) sold down its stake in the company to 4.92% yesterday saying it has no intention of making a takeover offer.
• S&P has announced the December Q rebalancing of S&P/ASX indexes. Nothing major – Riversdale Mining (RIV) will be added to the ASX 200 effective December 21, while Wesfarmers PPS (WESN) were cut along with Australian Pharmaceutical Industries (API) and Energy Developments (ENE).
• Downer (DOW) up 1.6% to 524c – it has sold Century Resources for book value of $172m.
• Fortescue Metals (FMG) has put an end to media speculation announcing it doesn’t have any interest in Midwest. FMG up 35c to 5655c.
• Metcash (MTS) goes ex dividend today – 9c.

In the MARCUS TODAY newsletter today we have an article about my Nephew’s Bar Mitzvah (he’s a Catholic actually). It will perhaps give you an idea about Christmas presents this year. A portfolio…and an education. We will also post the regular weekend list of the CHEAPEST stocks in the ASX 200 and the HIGHEST YIELDING stocks in the ASX 200.

Have a good weekend.

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