Morning Market Report, Jun 05, 2007

The market is down 5 today. The SFE Futures suggested a 1 point fall in the market this morning.

The Dow Jones was up 8 moving in a 72 point range and closed slightly higher despite spending most of the session in negative territory on the back of an 8.3% fall in the benchmark Shanghai Composite A Index. Takeover activity and broker upgrades for Wal Mart (up 3.5%) pushed the market into positive territory towards the end of the session. Solectron Corp agreed to a $3.6bn bid from Flextronics International and subprime mortgage lender, Accredited Home Lenders Holding closed 10% higher after agreeing to sell itself to private-equity firm Lone Star Funds for around $400m. Several brokers upgraded Wal Mart after announcing they would cut their aggressive store-growth plans and issue a buy-back and most airlines closed lower after Continental Airlines announced unit revenue fell in May. Energy stocks closed up on the back of a 1.6% rise in the oil price and the NASDAQ closed slightly higher.

Resources having a good day. BHP up 63c to 3280c and RIO up 2c to 9591c. Metals all up overnight, Copper up 2.3%, Zinc up 2.1% and Nickel 0.3%. Zinifex up 1c to 1777c. Aluminium 1.3%. Oil price up $1.08 to $66.17 on the back of news that union officials in Nigeria’s oil and gas industry saying they would support a workers strike. Woodside up 23c to 4393c. Gold down 50c. Newcrest up a huge 125c or 5.8% to 2300c on rumours that they are going to restructure their hedge book. The stock was also up 2.5% yesterday.

Another good day for the market despite the 8.26% fall in the Chinese stockmarket yesterday. A bigger fall than the 6.5% last week and almost as big as the 9.2% in February. We shrugged off both those falls and will seemingly shrug off this one as well. The Dow Jones was up 8 overnight. The day after last week’s fall it was up 111. The Nikkei (Japan) and the Hang Seng (Hong Kong) both managed rises yesterday despite the China market being down.

Metcash (MTS) getting smashed today, down 33c or 6.37% to 485c after reporting a weaker-than-expected full year profit result. They announced NPAT of $173.8m before one offs against consensus of $177m, up 41% on sales of $9.76bn representing a profit margin of 1.7%. Looks like the fall in the share price was a result of lower-than-expected guidance for FY08 in the high-single-digit range against market forecasts of 20%.
The AFR has reported this morning that Foxtel could revive talks with Austar (AUN) in the next couple of weeks. AUN did say that talks had been terminated and that it remained in discussions with other potential bidders. Talk is that AUN want 200c a share. AUN up 2c to 169c.
Wesfarmers (WES) up 55c to 3891c after announcing they have successfully completed the sale and lease back of their retail warehouse property portfolio. The sale process, which was conducted by investment property banking group Grant Samuel will generated $203m in gross sale proceeds.
Telstra (TLS) up 4c to 496c after the AFR reported that Communications Minister Helen Coonan is looking at a tender to get a $4bn plus high-speed broadband network built. Would be positive for TLS if true.
Cazaly Resources (CAZ) down 5c or 6.9% to 67.5c after they told the ASX they couldn’t explain the increase in their share price – up from 59c to 81c this week. The company are still awaiting a new ruling from the WA Government on their claim to the Shovelanna tenement lease held previously by RIO.
Goldman Sachs JB Were have downgraded their recommendation on Iluka to SELL from HOLD. They have a 507c valuation. Price down 1.3% today to 575c.
CSR is ex dividend 9c FF this morning.
The RBA meet today with an interest rate decision tomorrow. They appear unlikely to do anything with rates. The European Central Bank meet tomorrow and the Bank of England on Thursday. The ECB is expected to up rates from 3.75% to 4.0% and the BoE is expected to leave rates at 5.50%. Great Southern Plantations (GTP) up 4c to 254c having published an institutional presentation. Of course Timbercorp announced a takeover approach yesterday taking GTP and TIM higher. Goldman Sachs JB Were upgraded TIM to MARKETPERFORM from UNDERPERFORM but keep a long term SELL recommendation.
UBS has a $108 target price on RIO this morning with an analyst visit coming up and the positive outlook for iron ore prices expected to be the focus.
ABN AMRO have a HOLD and a target price of 500c on Telstra saying they are unlikely to have any capital management initiative until 2009.
Deutsche Bank are talking about another capital management initiative from Aristocrat Leisure as their on market share buyback exhausts itself. They have a BUY recommendation and a 1720c valuation. ALL up 4c to 1550c.
Australian Renewable Fuels (ARW) are a hot stock of the day on the announcement of a Caltex supply contract. Price up 22% to 50c.
The Current Account deficit in Australia has come in higher than expected at $15.38bn against forecasts of $14.7bn.