Morning Market Report, Apr 02, 2008

The market having a great day – up 148 – on the back of Wall Street’s big session overnight. The SFE Futures sugggested a 176 point rise in the market this morning.

Wall Street up 391 overnight and closed right on its high. Capital raisings by Lehman Bros ($4bn – initial $3bn capital raising was oversubscribed) and UBS ($15.1bn) suggest that someone at least has enough confidence in the financial sector to commit capital. It is a show of confidence that the worst may be over, financials are at a bottom and that the credit markets may be easing up. It was the best start to a Q in 70 years. The first day of a quarter is often an up day as new cash is invested. The rally is being seen as a sign that there is a lot of cash on the sidelines and one market report described it as the “elimination of survival risk”. In other words a sign that financial institutions will not be going out of business but will be supported. The big rally in financials came at the expense of commodities, a US dollar rally kept commodity prices under wraps. Compared with the S&P 500 down 3.9% in the last year the Financial sector is down 25.6% and consumer discretionary sector down 15.5%. Both sectors had big rallies last night. VIX Volatility Index down 11% to 22.68… down 30% from it mid March high. Dow Futures at 11am are suggesting a 4 point fall tonight.

Both BHP and RIO up in ADR form overnight, 1.61% and 1.92% respectively.
Metals mostly down overnight – Nickel down 1.4%, Aluminium down 1% and Copper 0.5%. Zinc was unchanged.
Oil price down 62c to $100.92 after the US dollar strengthened against the Euro and other currencies.
Gold down $33.30 to $882.90. Newcrest down 4.8%, Lihir 3.7%, Sino Gold down 5.71%.
Bonds down with the 10 year yield up to 3.55% from 3.43%.

OPES – A number of clients have tried to take out an injunction to stop ANZ selling any stock. See front page of The Age Business section. Some unconfirmed stories that ANZ halted their selling yesterday.

Around 25% of eBet Ltd (EBT) or 56.2m shares are also subject to equity finance with Opes Prime, so are 10m Australian Institute of Property Management (APM) shares or 3% of the company. Imagine Resources’ (IMA) MD George Sakalidis holds 5.5m company shares with OPES, company trying to organize an off market buyback. Cazaly Resources’ (CAZ) director Nathan McMahon is also in the same boat, his 1.9m shares or 3.2% of the company is subject to a margin lending arrangement with Opes. IMA, EBT, APM and CAZ are all trying conduct an orderly placement of the shares in their company held by OPES. IMA last traded at 149c, EBT at 6c, APM at 0.6c and CAZ at 24c.
Bannerman Resources (BMN) has had its trading halt lifted, the stock is down 4c to 176c. Director Nathan McMahon had 14.7m shares or 10.2% of the company with OPES.
Red Fork Energy (RFE) is another stock – placed itself in a trading halt and say they cannot accurately estimate the total number of its securities held through accounts with Opes, but confirmed at least 7.25m shares or around 8% of the company is with OPES. It has requested the receiver lodges a substantial shareholders notice as required by law to clarify the issue.
The Australia government has cancelled its $958m funding agreement to an OPEL consortium to build a regional broadband network. Not good news for AUN and FCL but share price still OK, AUN up 6c to 138.5c and FCL up 0.5c to 184.5c.
United Group (UGL) has won a contract extension with the Department of Foreign Affairs and Trade worth more than $65 million over 4 years with an option to extend for another 4 more years. UGL up 14c to 1223c.
Roc Oil (ROC) announced the Dunsborough-2 appraisal well WA will be plugged and abandoned following yesterdays comments that the well looked to be “non-producible”. ROC down 2c to 198c. AWE up 5c to 348c. ARQ up 2.5c to 111.5c. They were all well down yesterday.
FKP up another 4.6% this morning after a 7% rise yesterday on the back of their $375m bank debt restructure and extension. They will not now have any refinancing to do until June 2009. They are on a 40% discount to NTA with an 11% yield.
Talk that Oil Search will progress to a FEED decision on their PNG project this week. OSH down 1.4% today. Citigroup have initiated research coverage with a HOLD. 487c target price.
CSR down for the last two days and doing nothing today with Credit Suisse saying they are cum a 10-20% consensus earnings downgrade which may be communicated at company presentations this week.
Computershare’s (CPU) offer for QM Technologies is now unconditional. CPU now has a 94.53% stake – up 33c to 912c.
Telstra has announced a 500m EURO benchmark bond issue. TLS up 11c to 453c. The second Telstra 3 instalment worth 160c a share or $6.6bn in total is due on May 29th and the suggestion is that shareholders will be selling ahead of the date to raise the cash.
Leighton Holdings up 5% after Goldman Sachs JB Were upgrade their recommendation to HOLD from SELL. They have a 4280c target price. Now 4344c up 208c today.
Mount Gibson (MGX) up 3% on talk of a bid from China’s Shougang and on a UBS Warburg research recommendation. Target price of 320c. Merrill Lynch has a 500c target price. Now 292c up 9c today.
AFG (AFG) outperforming after the review period under its senior bank facilities was extended until April 11.