Morning Market Report, Jun 17, 2008

The market is down 53 today and 5336 is close to support at 5300. A second floppy day on the trot, falling more than expected. Banks the main culprit taking 16 points off the index. Seems as though they will remain under a cloud until the Babcock & Brown situation is clarified. No one quite knows their exposures. Meanwhile Babcock & Brown is having a rally on hope more than fact. BNB up 9%. BHP has added 14. Golds up. The SFE Futures predicted a 26 point fall.

The Dow close down 38. A bit of a quiet session. Up 12 at best and down 95 at worst. Financials up as Lehmans experienced a relief rally after its 2Q results – no additional losses to the preannounced $2.8bn in mortgage related losses. They announced they’d cut their mortgage holdings by 20%. Mortgage stocks MBIA, Ambac, Fannie Mae and Freddie Mac all jumped. Morgan Stanley and Goldmans reporting this week, both up. In economics, June Manufacturing Activity in New York (General Economics Index) down more than expected – fell 5.5 to -8.7. US housing starts expected to show a decline for May and hit the lowest levels since 1991 – to be released today. Apple had its biggest rise since May on talk the iPhone will boost profits more than expected. Three of the biggest S&P500 stocks – GE, AT&T, Verizon (5% of the index) – all down on broker downgrades.

Both BHP and RIO up ADR form overnight, 0.97% and 0.27% respectively. BHP up 2% to 4450c and RIO down 50c to 13563c.
Metals mixed overnight – Copper up 1.5%, Aluminium up 1% and Nickel down 0.2%. Zinc down 1.1%.
Oil price down 32c to $134.52 despite hitting a record of $140 – Little news to explain the drop apart from Saudi Arabia’s decision on the weekend to lift production. WPL down 47c to 6080c.
Gold up $13.20 to $886.30. Newcrest up 3.2% to 2711c.
US Bonds down with the 10 year yield up to 4.27%.

Resources up today – According to the China Metallurgical Newsletter (government owned) “It is expected that the price……of ore from Australia will reach more than 80% this year” which “has stimulated domestic steel mills and traders to enlarge their iron ore imports”. It is seen as the government warming up the market for the rumoured 85% iron ore price settlement with BHP and RIO.

Babcock & Brown up first thing as BNB met with some of its bankers last night to review its $2.8bn debt facility. Closed unchanged yesterday. CEO Phil Green has admitted he has lost investor confidence. European wind farms worth around $2bn will be sold with first round offers due this week. The stock is up 9% to 572c. BBP also up 9.6% to 80c.

Merger going ahead – Zinifex shareholders voted to accept the all share offer from Oxiana – Group to be known as OZ Minerals Ltd. Last day of trading in Zinifex will be Friday. Speculation that the merged entity will be bid for or will make bids. They have enough cash to make some reasonably significant moves. ZFX down 9c to 858c. OXR down 1c to 270c.
Talk is that South Korea’s Posco is looking at challenging ArcelorMittal to buy the remaining 19.8% stake in Macarthur Coal (MCC) held by founder Ken Talbot. MCC up 22c to 2002c.
The Capital Group has ceased to be a substantial shareholder in Fosters who recently admitted the failure of their Wine strategy and the resignation of Trevor O’Hoy the MD. FGL down 9c to 529c.
Centennial Coal (CEY) has hit a fresh yearly high this morning after saying it has a strong earnings outlook for fiscal 2008 and 2009. Good timing considering export prices are expected to rise at the same time. CEY up 43c to 608c.
Orica has approved its planned ammonium nitrate plant in East Kalimantan, Indonesia, it’s now expected to have a price tag of around US$550m. ORI up 1c to 2981c.
GRD Ltd (GRD) doing well – it has signed an ongoing services agreement with BHP for its Ravensthorpe Nickel Operations. GRD up 1c to 84c.
Perpetual’s (PPT) Funds Under Management increased to $32.8bn from $32.6bn in May.
Nufarm (NUF) has signed deals with a number of Chinese glyphosate manufacturers to secure the company’s long-term supply of its product. NUF down 32c to 1652c.
Crane Group (CRG) has won a contract to supply 3,500km of pipe and fittings worth $65m to the Wimmera Mallee Pipeline Project. CRG down 19c to 1320c.
City Pacific (CIY) said they have received due diligence satisfaction from the buyer of its Breakwater Pacific and Townsville Futures Development Area. CIY up 1c to 36c.
Crown (CWN) has announced that neither it nor its Executive Chairman James Packer are in advanced talks to build a $1.5bn casino in the Philippines contrary to media speculation. CWN down 3.1% to 900c.