Morning Market Report, Jun 30, 2008

The market is up 36. Resources are up 2.2% following the strong moves in the UK and the US. Financials are down 0.3% but being held up by BNB and MQG with good news on the banks’ waiver of BNB’s debt trigger clause.

Dow down 107. Up 32 at best. Down 155 at worst. SFE Futures down 4. Dow down 14% for the year. Crude up 45% this year. Resources up. Gold up $16. Financials down the most — fell 1.3% — only insurance brokers up 1.9% in the sector. Financials down 6.5% for the week. Merrills down 1% — reported to be about to post more write downs — may sell BlackRock. Consumer confidence survey at 56.4% — lowest for the year. Energy up. Tech majors down. Home builders down. Saudi’s embarking on what they are calling the single largest expansion of oil production capacity in history — will spend $10bn to pump 1.2m barrels per day from the Khurais field by next June.

Both BHP and RIO up in ADR form on Friday, 2.22% and 0.88% respectively. BHP up 93c to 4383c. RIO up 384c to 13588c.
Metals mostly up on Friday – Copper up 1%, both Nickel and Aluminium up 0.7%, and Zinc down 3.1%. Zinifex flat at 820c.
Oil price up 78c to $139.68 after Qatari Oil Minister Abdullah al-Attiyah say he was considering the possibility of cutting output in response to a US threat to sue OPEC members. Woodside up 84c to 6813c.
Gold up $16.20 to $931.30. Newcrest up 144c to 3033c.
US Bonds up with the 10 year yield down to 3.96%.

Lots of weekend press about what a terrible year its been for the stockmarket. The ASX 200 is down 16.54% so far this financial year and down 23.31% (or $400bn) from the peak on 1 November. The main issues for the year have included $400bn of sub-prime and credit market related losses, the collapse of Bear Stearns, the securities lending debacles (OPES, Lift, Tricom and Chimera), a record oil price, higher mortgage rates, a strong A$, short selling, 70% of IPOs underwater (RAMS down 97%), the collapse of MFS, ABC Learning, Centro, City Pacific, and Babcock & Brown and its satellites, a 35% fall in the foundation sector of Australian long term investments — the banks — and some aggressive tax loss selling in the last month.

Managed funds will report their worst returns in 20 years.
A$ close to all time highs.
The Dow Jones is now below the peak hit in 2000, in other words it has gone nowhere in eight years whilst the Australian market is up 69%.

Babcock & Brown (BNB) up 12% in early trading on the back of the announcement that its lenders have dropped the market cap trigger clause on its debt facility and that BNB would prepay $400m of its debt using proceeds from recent asset sales — they have also agreed an increase in the rate on their debt facility by 50 basis points which will drop on the re-establishment of their BBB credit rating. Phil Green (CEO) says “The decision by the banks underscores the strength of our business and the banks commitment to Babcock & Brown”. Macquarie follows BNB up 2.4%. The whole Babcock stable having a better day with BBP up 7% and BBI up 4.4%.

APN News & Media (APN) said sales up 2% on-year to June 30 but 1H earnings to remain unchanged. Said net profit before one-offs would be “broadly in line with the same period last year.” APN down 1c to 300c.
Flinders Mines (FMS) in a trading halt pending “Further scientific clarification work to be carried out on recent results”. This is the company that recently announced that RC drilling at Hamersley would commence in the third week of June on five iron or targets “proximal” to the known inferred resources of Fortescue Metals.
Coal seam gas stocks Molopo and Metgasco both up 7% on no announcements.
Gold stocks having another good day on the back of a $16 jump in the gold price. Newcrest up another 6% on the research this morning post its announcement on Friday securing alternative gas supplies (at higher costs). NCM up 160c to 3049c.
Macarthur Coal (MCC) said ArcelorMittal has increased its shareholding from 14.9% to 19.9% through buying a 5% stake from Talbot Group Holdings — $20.00 per share. MCC down 30c to 1770c.
Iluka (ILU) announced it will restart its Western Australia operations having secured an alternative gas supply — diesel LPG. Apache to resume two-thirds production by Aug and full production by Dec. ILU down 3c to 468c.
Perpetual (PPT) will sell its managed infrastructure funds to investment and broking firm Wilson HTM Investment Group (WIG). PPT up 26c to 4430c.
Sonic Healthcare (SHL) expands its business into the US by buying Clinical Laboratories in Hawaii and associated pathology business for $121m. SHL up 4c to 1459c.
Beach Petroleum (BPT) records increased production from its Cooper-Eromanga basin project. Also expects significant Queensland Coal Seam Gas growth. BPT up 4 c to 136c.
Ausenco (AAX) announced its Sandwell business had started a $12m contract for Porto Brasil’s eleven birth multiproduct port. AAX up 19c to 1549c.