Morning Market Report, Apr 12, 2007

The market is down 5. The SFE Futures suggested a 26 point fall in the market this morning.

The Dow Jones was down 89 moving in a relatively large 124 point range and closing lower for the first time in eight sessions after minutes from the last federal meeting indicated that an interest rate rise was not out of the question. The news caught the market by surprise, the Fed was supposed to be leaning more towards a rate cut than a rise. A higher oil price didn’t help the market but it did help energy stocks to close higher. Homebuilders had a bad session after the National Association of Realtors predicted that existing home sales will fall by 2% this year, revising its initial forecast of a 0.9% fall and after KB Homes told us the housing market is going to get worse before it gets better. There are a heap of first quarter numbers out next week, expectations are for earnings growth to be down from last year with some suggestions we might see our first results season in 14 quarters with earnings growth less than 10%.

Resources are struggling today. BHP down 34c to 3026c and RIO down 34c to 8316c. Metals mostly down overnight, Copper up 1.4%, Aluminium down 0.1% and Zinc down 0.9%. Zinifex down 26c to 1575c. Nickel down 3.2%. Oil price up 6c to $61.98 on the back of colder than expected weather in the Northeast USA and weekly energy supply data showing crude stockpiles increased by 700,000 barrels, well under the estimated increase. Woodside up 4c to 3892c. Gold up 30c. Newcrest up 8c to 2381c.

Yesterday’s break even finish came after a 9.1% jump in the ASX200 in the past 24 days, today’s breather was overdue. It is interesting to note that although the market is up 18% this financial year, earnings have only risen about 7%. That means 11% of the market’s rise has simply been from prices going higher, or “PE expansion” as its known.

Cabinet met yesterday and discussed the single desk monopoly held by the Australian Wheat Board (AWB). The Nationals are in favour of them retaining it but the government says it will do what is in the best interest of growers. A decision was hoped for by the end of this month but there are suggestions that it could linger until October. AWB up 3c to 356c.
Woolworths (WOW) are in the AFR this morning saying that they have enough funds to make a number of acquisitions and have appointed advisers to look at their options this is despite spending $4bn in the past four years on acquisitions. WOW up 12c to 2793c.
Harvey Norman (HVN) down 5c to 502c despite sneaking in their impressive 3Q sales numbers a day early. Sales were up 17%, slightly better than the 15% expected. A few brokers this morning have upped their target price on the stock saying margins should improve as a result.
Summit Resources (SMM) up 20c or 3.45% to 600c after Paladin Resources (PDN) announced that it would increase and extend its offer. Under the new offer, SMM shareholders will receive 1 PDN share for every 1.67 SMM shares. The offer is final and will close on the 27 April 2007. PDN down 32c to 1005c.
Uranium stocks look like they have run out of steam after yesterday’s huge gains on the back of a 19% increase in Uranium to US$113/pound.
Freshtel (FRE) down 2.5c to 64c. It just had its CEO resign after three months in the job. Freshtel sell VOIP software and had a big run last year after they struck a deal Tesco in the UK to bundle it with £20 handsets at Tesco checkouts.
Downer EDI (DOW) have secured a $200m contract from Woodside. DOW up 5c to 725c.
Brokers are beginning to sneak out a few cautionary notes on stocks with large overseas earnings in the face of a 20-year high in the A$ trade weighted index. One of the stocks in the firing line is Westfield Group (WDC) down 28c to 2122c this morning.
We are still waiting for details of the new bid structure for Qantas from APA. QAN at 535c up 4c this morning.