Morning Market Report, Jul 28, 2008

Not a good start to the week — down 72 after an ANZ profit warning – the banks have knocked over 50 points off the index — that comes despite the SFE Futures predicting a 24 point rise in the market this morning prior to the warning. The ANZ has experienced its second worst day ever. Friday was its 3rd worst. They have followed in the NAB’s footsteps and announced $1.2bn worth of provisions. Financials down 3.6%. Resources putting up a bit of a fight – outperforming +0.6%. Financials down 4.2%.

The Dow Jones closed up 21 on Friday – Up 95 at best. Down 24 at worst. The Dow closed down 1.09% for the week but is off 4.8% of its low last week. The positive session came on the back of upbeat economic data and mostly decent earnings reports. Financials down 0.6% after being down as much as 2.2% early on — concerns remain regarding the strength of the banks’ balance sheets. Congress working to push the enactment of the sweeping housing legislation which just passed by lawmakers this weekend. Bloomberg report that the ‘Bank of America, JP Morgan and US lenders may sign up customers backed by the government, and cast off bad home loans after Congress passed legislation to prop up Fannie and Freddie. Technology up 1.6% – Nasdaq outperformed after strong gains in majors — Microsoft up 2.83%, Yahoo! up 2.92%, Google up 3.44%, Apple up 1.94%, Intel up 1.57% – helped by Juniper Networks beating 2Q profits expectations.

Both BHP and RIO up 2% in ADR form on Friday.
Metals mixed on Friday — Copper up 0.7% and Aluminium up 0.65%, Zinc down 0.8% and Nickel down 1.72%.
Oil price down $2.03 to $122.58 — down seven of the last nine sessions, and is down 16% from its $147 peak. Woodside down 179c to 5042c.
Gold up $4.50 to $926.80. Newcrest up 23c to 2918c.
US Bonds down with the 10 year yield up to 4.10% from 4%.

John Stewart (NAB CEO) was on TV at the weekend painting a pretty grim picture with the message that the NAB has taken the pain now, but everyone else has to follow. ANZ have obliged this morning with a profit warning of their own. They will announce 2H provisions of around $1.2bn due to ongoing deterioration in the global credit markets. 2008 Cash EPS expected to fall by 20-25%. CEO Mike Smith says, “ANZ’s underlying business is continuing to deliver a solid performance, and we expect a cash profit of over $3 billion in 2008… However we need to recognize where we are at with legacy issues in Institutional and the change in the economic cycle.” Dividend maintained. ANZ down 10% or 177c to 1598c.

It has been a busy start to the week…

Lots of research this morning on the National Australia Bank (NAB) after its profit warning on Friday — ABN AMRO has a target price of 3496c down from 3746c. Were’s maintain their Buy recommendation but took them off the BUY conviction list. They have a 3333c target price and believe the stock was oversold on Friday. Merrill Lynch and Macquarie have UNDERPERFORM recommendations. NAB down 64c to 2592c.
Macarthur Coal (MCC) has welcomed the formal approval by the board of South Korea’s Posco of its purchase of a 10% stake in the company. MCC up 79c or 6% to 1430c.
Australand Property (ALZ) has announced a 79% fall in 1H profit to $25.6m due to a downturn in the residential market conditions, especially in NSW. ALZ currently in a trading halt ahead of a capital raising to strengthen its balance sheet. ALZ unchanged at 97.5c.
Mirvac Group (MGR) MD Greg Paramor will be replaced with current Executive Director Nick Collishaw after delivering MGR’s annual result on August 26. MGR down 7% to 228c.
Qantas Airways (QAN) has appointed Alan Joyce — current chief executive of subsidiary Jetstar — as CEO and will replace Geoff Dixon after the annual shareholders meeting on November 28. QAN down 4c to 345c.
Atlas Iron (AGO) has announced a significant increase and update to resources estimates of its Ridley Magnetite. 52% increase in total resources to 1.32bn tonnes. AGO up 3c to 258c.
Lend Lease (LLC) have won a $344m retail development contract. LLC down 1c to 978c.
Equinox Minerals (EQN) has announced that the recent exploration drilling at its Kanga Prospect continues to intersect significant copper intercepts. Hasn’t done much for the price. EQN down 6c to 364c.
Iron ore Peru project developer Strike Resources (SRK) up 4.3% after a $103m placement at a 39% premium to a Russian steel billionaire (who owns part of the Arsenal Football Club). SRK up 9.5c to 207c.
Coal stocks blitzing it after Felix Resources (FLX) up 11.4% after it announced that it is now a takeover target. It has received takeover interest from a number of parties, but all talks are preliminary and no formal written offer have been made. FLX up 11% to 1957c.
Orica (ORI) down 12% after raising around $600m through an institutional placement at 2275c to pay debt and fund growth. They will also have a 1 for 8 retail rights issues at 2250c.
Chairman of soon to be listed BrisConnections Trevor Rowe says his company is a “natural short” (?!). It will be the biggest float for 2008 — $1.2bn. Lists this week.
Revenue from Macquarie Infrastructure Group’s (MIG) France’s Autoroutes Paris-Rhin-Rhone increased 1.9% from last year in the last Q and 4.4% in the last half year. MIG down 12c to 253c.
Merrill Lynch have upped their recommendation on St George Bank (SGB) to BUY saying there’s a higher chance that the St George deal goes ahead with ACCC basically giving the takeover the green light. SGB down 6% to 2686c.