Morning Market Report

The market is up 21. The SFE Futures suggested a 25 point fall in the market this morning.

The Dow Jones was up 76.1 moving in a 115 point range and closing up on the back of takeover activity and positive earnings results. Steelmaker Gerdau Ameristeel Corp. announced they would acquire Chaparral Steel Co. for $4.22bn; the Times of London reported Rio Tinto is “poised” to make a $34bn ($90) bid for Alcan topping the Alcoa bid ($73), and talk is that Colgate-Palmolive are contemplating launching a bid for Unilever. In company related news, Compuwave Corp. closed 20% lower after their 1Q earnings missed analysts’ expectations and oil company Chevron Corp. finished higher after saying their quarterly results will be higher-than-expected on the back of higher metal prices and stronger refining margins. It was an up session for all three major indexes, the NASDAQ closed 0.5% higher and the S&P 500 0.6%.

Resources all up today… BHP up 70c to 3850c. The Australian is talking about BHP looking for permission to export uranium bearing copper concentrate from Olympic Dam to China (instead of processing the ore at mine site) – the company says it is an issue still in pre-feasibility and China is not their only option. Metals all up overnight, both Nickel and Zinc up 2%, Aluminium up 0.9% and Copper up 0.4%. Zinifex up 44c to 2063c. Oil price down 22c to $72.58 after the Energy Department announced higher-than-expected US gasoline inventories. Woodside up 20c to 4695c. Gold down $2.30. Newcrest up 51c to 2440c.

The market is looking a lot healthier today and has made up some ground on yesterday’s 36 point drop. Jobs data this morning is a bit weaker than expected. A$ down from 86.30 to 86.15.

• RIO up 222c from 10433c on the Alcan bid story. Suggestions that RIO will bid $90 topping Alcan’s $73 bid. If true it will be another example of how bullish the big resources players are about the extension of the current commodities cycle.
• News on the wires this morning that HBOS’s BankWest is planning on opening more than 160 new branches in Australia over the next 3-4 years. It is the biggest bank network rollout ever undertaken in Australia from scratch and is likely to give the big four along with the other smaller players something to think about. Amazingly enough the banks are getting thumped against the trend this morning – they and their Monopoly is so sensitive to the threat of competition – it’s almost unthinkable – competition – pah!
• There has been a $4.2bn bid in the US for a steel company. Steelmaker Gerdau Ameristeel Corp. announced they would acquire Chaparral Steel Co. Steel stocks flying. Bluescope Steel (which the technical analyst likes) is up 3.3% or 35c to 1119c this morning. Sims Group up 5%.
• United Group (UGL) up 44c to 1799c after placing $318m of new stock to fund their $477m acquisition of US listed UNICCO (they came out of a trading halt today after announcing the deal). UGL sold 14.3m shares at 1700c in an institutional placement, under the agreement, 4.2m will be issued to the vendor of UNICCO at 1667c a share. UGL is up 13% in the past month.
• Westfield (WDC) is in a trading halt today – they are conducting a bookbuild as part of their plan to raise new shares worth $3bn at 1950c each, 44c cheaper than their last trading price. (1999c)
• Seek (SEK) down 13c to 813c after announcing they have no idea why their share price is up 13% since 27 June (broker recommendation?). They received a speeding from the ASX and say that no announcement is required despite conceding operating results will differ (be up) from last year…no surprise there.
• CEO Eddie Groves recently upped his stake (yet again) in ABC Learning (ABS) for the seventh time to just over 4% – although he is one of those “Rich but not Retired” CEOs, could he possibly be thinking of taking the company private – as the management at Flight Centre did? ABN AMRO say ABS might be looking at making more acquisitions in the US. ABS up 8c to 673c.
• Harvey Norman (HVN) up 3c to 542c – Their CEO Gerry Harvey said this morning he’s interested in buying the Officeworks chain from Coles Group (CGJ). The stock, along with JB Hi-Fi (JBH) has been supported by this morning’s falling inflation expectations. JBH in record territory, up 43c to 1183c.
• Centro Properties (CNP) announced external inflows into their managed funds totaled $864m, exceeding their forecasts thanks to the favourable superannuation laws. CNP down 7c to 819c.
• Everyone who put money into the Ellerston GEMS fund (EGF), the listed investment company run by Packer’s fund manager is well underwater now. They listed at 250c and are now 228c. Of course no-one expects an LIC to trade above its listing price initially….because if you hand a fund manager a dollar it is immediately worth less than a dollar because of fees. Now on a 9% discount to issue price and their initial NAV they might be worth a look for anyone interested in a listed investment company investing globally with a Packer “frill” on the side. EGF up 1c to 229c.
• Cemex has 91.8% of Rinker. There are still a few 2000 share trades going through. The problem now is that you are may not get your bid acceptance in on time (closes Monday 7pm) so you will probably have to be compulsorily acquired and that takes a bit longer. Still…at 1840c you are making over $2,000 taking option 2 which you still can under compulsory acquisition. Everyone’s a winner.

By popular request we have a write up/explanation of the 45 day rule in the newsletter. Well worth understanding as we head into results season. You know the game…you buy a stock 45 days before its expected ex dividend date and you can then sell it on the day it goes Ex and still get the imputation credit. We are now less than 45 days from the flood of dividends starting.

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