Morning Market Report, May 29, 2008

The market is up 47. Resources taking the lead up 1.4%, financials up 0.5% and Industrials up 0.5%. The SFE Futures predicted a 42 point gain this morning.

The Dow index closed up 45 – Up 54 at best. Down 53 at worst. Oil up again – up $2.18 to $131.03 having slipped below $126 at one point. Petrol prices in the US hit a record $3.94 a gallon. The oil price has not had two consecutive falls in price since the beginning of the month. In economic news, Durable Goods orders for April were better than expected – down 0.5% but stripping out transportation (autos and aeroplanes which saw a sharp 8% fall as orders for commercial aircraft fell 24.4%) they were up 2.5% – biggest rise in 9 months and Q1 GDP revision tonight expected to see Q1 GDP revised up from +0.6% to +1.0%. Financials mostly down as AIG fell 4.7% on an analyst comment that the $20 they had raised was not enough. JP Morgan down 0.35%, Citigroup down 0.28%. Merrill Lynch, Lehman Bros and Goldman Sachs down 0.41%, 0.97% and up 0.52%. Bank of America down 0.88%. Housebuilders up – Lennar up 0.29%, Pulte Homes up 0.72%, KB Home up 0.63%, Toll Bros up 1.96%. German and French markets up over 1%. BG Group expected to confirm and increase in offer for Origin from $14.70 to $16.

Both BHP and RIO in ADR form overnight, 0.66% and 1.04% respectively. BHP up 78c to 4589c. RIO up 197c to 14392c.
Metals all down – Nickel down 3.6%, Zinc down 1.5% and Aluminium 1.3%. Copper down 1.2%. Zinifex down 7c to 995c.
Oil price up $2.19 to $131 on the back of threats against Nigerian facilities. Woodside up 204c to 6504c.
Gold down $7.40. Newcrest down 4c to 3221c.
US Bonds down with the 10 year yield up to 4%.

On the economic front – Q1 capital expenditure numbers down 2.5% and weaker than the 3.0% expected. Could lead to some GDP downgrades and will be seen as a positive sign for inflation and interest rates.

Expecting Origin Energy to announce an increased and agreed takeover bid from BG Group (the old British Gas) – BG are thought to have upped their offer from $14.70 per share which valued the company at $13bn, to somewhere between $15-$16 par share. ORG now 1460c in a trading halt.

Bit of action in small iron ore stocks today with FerrAus (FRS) in which the Chinese recently took a 10% stake through a company placement at 115c announcing a major new discovery. Price up 6%. And in recognition of their intention to become and iron ore stock Flinders Diamonds (FDL) has changed its name to Flinders Mines (now FMS).

Santos (STO) in a trading halt pending an announcement – says it is in the final stages of talks to sell part of its equity interest in the Gladstone LNG project in Australia which will be built at a cost of $7.7bn. Looking for a major partner to take on 30-40%.
According to Australian Tourism Export Council Managing Director Matt Hingerty, Australia’s tourism industry facing “a dreadful year” because of higher oil pries and the Aussie dollar performing the way it is. Not positive for Qantas (QAN), Virgin Blue (VBA), Flight Centre (FLT) and Wotif.com Holdings (WTF) to name a few – QAN down 5c to 340c. VBA down 1.5c to 70c. FLT down 14c to 1904c.
Talbot Group, led by Ken Talbot – majority shareholder of Macarthur Coal – has become a substantial shareholder in Riversdale Mining (RIV). RIV up 40% to in the past quarter and up 333% in the past year and 5% today. RIV up 50c to 1025c.
GrainCorp (GNC) down 4% after announcing a drought affected 1H net loss of $6.5m, compared to a 1H $5.5m profit last year. GNC down 55c to 1105c.
Centro Properties (CNP) – which is struggling to refinance $6.6bn in debt – says it doesn’t want to comment on talk that it’s close to selling its 45% stake in the U.S. shopping mall fund it manages. CNP up 4c to 39c.
UBS has put a BUY recommendation on Macquarie Infrastructure Group (MIG) saying it has been affected by the “contagion” from the Babcock & Brown Power debt issue which is not warranted. MIG up 2c to 307c.
Toro Energy (TOE) – uranium stock – up 11% on a resource upgrade. TOE up 2c to 37c.
PanAust (PNA) up 5% on the news it has intersected a broad high-grade zone of copper-gold mineralization at its Puthep Copper Project in Northern Thailand. PNA up 5c to 112.5c.
Oxiana (OXR) announced that a small fire forced the temporary closure of its Sepon copper plant in Laos. No effect on FY production guidance. Will be out of production for 10 to 15 days. OXR down 2c to 322c.
Laxey Partners has upped its stake in Lion Selection (LST) to 10.3% from 5.4%. LST flat at 183c.