Morning Market Report

The market up 5 today having been down 45 at 10.30am – the SFE Futures were predicting a 29 point rise this morning.

The Dow Jones closed up 65 – Wall moved in a 187 point range and closed up for the first time in 3 sessions despite disappointing economic data. The government said new single-family home construction slowed to its weakest pace in 16 years with starts falling 5.4% and building permits down 1.5%, hitting a 14 year low. In company related news, Goldman hit a 3 month low – down 3.2% – despite announcing 4Q net income increased by a better than expected 2% to $3.22bn. Adobe put on 3.6% after it announced a bullish earnings forecast and on the back of Deutsche Bank lifting their recommendation to “buy” from “hold”. H&R Block up after its CFO said it has adequate liquidity, around $200m in lines of credit and about $250m in cash. Retailers have had their worst holiday season in 5 years – according to the International Council of Shopping Centers and UBS Securities. The sector registered its smallest weekly sales gain in two months. Best Buys fell 1.7%. A Bloomberg survey suggested profits at computer and software companies in the S&P 500 may increase by 24% next year, and financials had a strong session after the European Central Bank injected $500bn into the financial system to help the struggling housing market.

Resources doing OKish today ….its the banks that are the problem. The four majors have taken 20 points off the ASX 200. The St George Bank is down 2.1% on its AGM and the comment that the Centro Property Trust is one of their customers (although only in Australia and it is secured lending against Australian assets….not the crappy US assets). Otherwise they say momentum strong, excellent growth prospects, sees prolonged level of higher lending costs and confirms 10% earnings growth target. St George Bank would have to rally 16% to get back to its year high. It is on a PE of 15.1x and yield of 5.1% (7.3% including franking).

BHP up 40c today to 4049c and RIO up 309c or 2.4% to 13240. Rio Tinto announced late yesterday intentions to place around 15m tonnes of iron ore into the spot market in 2008. It believes, based on current market prices, it could earn US$1.5bn in additional pre-tax revenue from 15m tonnes of iron ore being switched from contract to spot. Metals mostly up overnight – both Nickel and Zinc up 0.8% and both Copper and Aluminium were unchanged. Zinifex up 28c to 1268c. It is down from a high of 1623c this month and 2160c this year. Oil price down 76c to $89.93 after Turkish troops withdraw from Iraq ending concerns about supplies. Woodside down 54c to 4676c. Gold up $8.10. Newcrest down 8c to 3030c.

• Centro Properties …the stock that fell from 662c to 52c this week and kicked off a rout in the whole equity market has jumped 65% today to 133c on the statement that they are not obliged to sell assets as part of the re-financing of $1.3bn of debt and that they are comfortable with the viability of the on-going business . Other trusts enjoying the glow….Goodman Group up 21.4%. The problem with Centro is that they are highly geared, need to re-finance in a hostile short term credit market and have some fairly crappy assets. It is a problem a number of stocks will have in the market but it is not a problem that the whole property sector has…but Westfield Group is down 10% in its wake.
• St. George Bank (SGB) had their AGM today – They have announced that John Curtis will be Chairman next year and replace John Thame who is retiring. Curtis is currently Chairman of Allianz Australia and chairman of the Merrill Lynch Australia advisory board. They maintain excellent credit quality, see prolonged level of higher costs due to the credit crisis and reiterate 10% Growth in EPS growth for 2008. SGB will continue to invest in the franchise and maintain its strong momentum. SGB down 48c to 3298c, the stock has only put on 1.3% this year.
• Fortescue’s 10:1 share split takes effect today after shareholders voted in favour of it at its general meeting on Monday – FMG trading as FMGDA for now. The number of shares you hold increases 10x and the share price falls to a tenth of yesterday’s price. Were’s maintain their HOLD recommendation, they now have a target price 653c. (Previous target price was 6535c) They have also announced this morning that the size of the resource at its Solomon East project has increased by an impressive 700mt and that it will continue to drill targets at the project with the expectations of posting additional resources in the area in the 1H of 2008. FMG up 13c to 608c.
• Allco Finance Group (AFG) has announced that its current funding facilities are sources in the Australian domestic market and that it has no direct reliance on US debt markets. They felt the need to reassure investors that everything is in order and that its gearing level is at around 35% with around $6.1bn worth of debt sitting on its balance sheet. AFG down 9c to 579c. AFG have more than halved from a high of 1324c before the credit crunch and were 798c earlier this week.
• Insurance Australia Group (IAG) have downgraded their insurance margin outlook for this year on the back the thunderstorms in Sydney that took place earlier in the month. It has revised its margin to between 9% and 11%, down from 11%-13% after receiving 21,000 claims, most of which are for hail damaged cars. IAG down 31% this year and down 10c today to 410c.
• Healthscope (HSP) announced yesterday it had acquired New Zealand Diagnostic Group which operates 11 pathology laboratories and runs two radiology businesses. The acquisition will bring additional sales of around NZ$47m and will be funded using existing debt facilities. Cost of the acquisition was not mentioned. HSP up 6c to 525c.
• Babcock & Brown Wind Partners (BBW) has announced the acquisition of Sweetwater 4 and Sweetwater 5 wind farms as part of their US expansion plans. BBW up 5c to 175c.
• Bradken (BKN) continues to struggle since issuing a profit warning. It is now down 46% in the past 4 days. Were’s have cut their EPS outlook by 12.6% in FY08, 15% in FY09 and 15.8% in FY10. BKN down another 14c today to 806c. It was 1506c a month ago.
• ConnectEast Group (CEU) reassures investors it has no exposure to interest rate increases until at least November 2010 and is in a strong financial position. Its interest rates are 100% hedged until 2010 and 80% hedged until 2014. CEU down 10% in the past month – it has struggled since Transurban (TCL) announced it was no longer interested in acquiring the company. CEU up 4.5c today to 163c and TCL down 13c to 682c. The reassurance reflects concerns that the next victim on the chopping block of refinancing would be the infrastructure stocks.
• Merrill Lynch say alumina prices will weaken towards the end of next year as supply catches up with demand. They expect China’s alumina demand to increase 16% in 2008 to 28.4m tons, or around 36% of global consumption, up from 33% on last year.
• Companies going ex-dividend tomorrow include Macquarie Private (MPG) and RR Australia (RRA).

You have until Thursday (tomorrow) night to subscribe to MARCUS TODAY at our Christmas prices and still get in the draw to win one of 5 iPod touches or a case of Moet.

THE MORNING MARKET REPORT is provided by the MARCUS TODAY daily stockmarket newsletter. You can subscribe for a free five day trial here.