Morning Market Report, Apr 26, 2007

The market is up 20, not even close to the 76 point gain the SFE Futures suggested this morning.

The Dow Jones up 135 – It moved in a 157 point range and closed above 13,000 points for the first time on the back of stronger-than-expected profit results and a stronger oil price pushing energy stocks higher. It’s been a promising earnings season so far with around two-thirds of companies reporting earnings that were either in line or higher than analyst’s forecasts. In what will be the biggest takeover in history if successful, Royal Bank of Scotland Group, Santader Central Hispano and Fortis have offered 72.2 billion euros ($98.5bn) to buy ABN Amro Holdings, beating Barclays offer of 64.6 billion euros. The S&P 500 closed up 1%, its 5.2% increase in April is the most for a month since October 2003 and the NASDAQ finished nearly 1% higher on the back Amazon.com (up 27%) exceeding all analysts’ expectations by announcing its 1Q profit more than doubled.

Resources performing today. BHP up 28 c to 3030c and RIO up 50c to 8425c. Metals mostly down overnight, Copper down 1.9% and Aluminium down 1.5%. Zinc up 0.7% and Nickle down a big 4.4%. Zinifex up 33c to 1648c. Oil price up $1.23 to $65.33 after a government report showed that US gasoline inventories fell to their lowest levels in 18 months as refinery operations unexpectedly fell. Exxon Mobil up $1.32 to record $79.92. Woodside up 26c to 3343c. Gold up $2.10. Newcrest up 6c to 2362c.

ANZ Bank (ANZ) down 15c to 3105c after releasing its interim results this morning. A solid but not dazzling open to the results season, cash earnings a touch better than expected, dividend of 62c (bit less than some expectations) and revenue growth forecasts of 7-10% were reiterated. They say retail banking is unlikely to be able to continue to grow as strongly and say H2 bad debts will rise. Bit of a yawn really. The price is up from 2920c this month alone so due a breather perhaps.
The Australian has a story this morning that Tesco and Woolworths (WOW) are going to team up to bid for Coles Group (CGJ). Coles of course are under offer from Wesfarmers offering 1647c in cash or cash and shares. CGJ is 1730c (up 16c) at the moment with an all time high of 1758c hit this month. The market is clearly of the opinion that a higher bid is coming although there are now a few doubts creeping in on what price private equity can afford – the sky is not the limit.
There is a lot of press about the Bendigo Bank (BEN) Bank of Queensland (BOQ) merger this morning after BEN rejected the BOQ’s offer on Tuesday. Someone noted that Bendigo Bank has 50,000 shareholders (a heck of lot) which makes a bid for the company very hard to achieve with the boards approval let alone without it. BOQ down 95c to 1766c and BEN 58c to 1641c. One broker has a recommendation to sell both saying the bid talk on BOQ is “implausible”. Both Citigroup and Credit Suisse have recommendation downgrades on BEN and BOQ with the comment that upside is limited by high PE ratios.
Tabcorp Holdings (TAH) was up 5.3% of Tuesday on takeover speculation but this morning it put out an announcement saying “it has not been approached or been involved in any discussions concerning a possible takeover of the company”. The market seem convinced something will develop, TAH only down 33c to 1767c. TAH has underperformed the ALL ORDS by 35% in the last 28 months and recently lost its CEO of course (fired). Goldman Sachs JB Were say the stock is unlikely to outperform from these levels without a takeover.
MacArthur Coal (MCC) down 18c to 515c after announcing its 3Q production and sales fell due to heavy rains and infrastructure bottlenecks in the state of QLD. It has cut its annual sales target to 3.7m tons from 4.5m tons.
More bad news for Australian Wheat Board (AWB) this morning, it is down 7c to 339c after The Australian reported the company was caught trying to send money to an Iranian transport company which is in breach of UN sanctions. The company’s future is still in doubt with the government yet to announce the outcome of review of wheat marketing arrangements.
ResMed is up 3% this morning after falling 14% on Tuesday on 3rd Q results and a surprise product recall described by some as a short term event presenting a long term buying opportunity.
Zinifex has had 3Q production numbers – price up 36c to 1651c. They say “Zinc demand remains strong and zinc stocks remain low”. Good for Perilya (PEM) and Kagara Zinc (KZL) – two off the best smaller zinc plays.
Talk of gold going through $700. Now US$685c. Lihir is the best exposure for traders – it has the highest correlation with the gold price.
RIO’s AGM tomorrow should have some comments on the commodities cycle.