The market is down 69 – it was down 125 at one stage. The SFE Futures suggested only a 5 point fall in the market this morning.

The Dow Jones closed down 29 overnight – It moved in a relatively narrow 89 point range and closed down ahead of the Federal Reserve’s crucial decision on interest rates and policy statement due tomorrow morning Australian time. The market is discounting a 100% chance of a 25bp cut (first in 4 years) to 5.0%, and the Federal funds futures contracts are showing a 50% chance of a 50bp cut to 4.75%, down from a 58% chance on Friday. Investors have had good reason to be anxious lately, ex Federal Reserve Chairman Alan Greenspan has talked up the possibility of a US recession due to inflationary pressures, Merrill Lynch & Co.’s First Franklin Financial Corp. had to cut jobs and Britain’s fifth largest mortgage lender, Northern Rock has seen its share price fall more than 50% as customers began withdrawing billions after saying the credit crunch will have a “meaningful impact” on their 3rd Q numbers. The market will also find out how badly the credit crunch has affected the major investments banks; Bear Stearns, Lehman Brothers, Morgan Stanley and Goldman Sachs Group all release their 3Q results later this week. The NASDAQ lost ground, Microsoft finished lower after one of Europe’s highest courts dismissed nearly all the their appeal of a landmark 2004 decision by the European Union and upheld around $690m worth of fines. They will now have to help rivals connect their products to the Windows operating systems.

Resources struggling today…BHP down 14c to 3868c. JP Morgan raised their earnings forecasts by 12% in both FY09e and FY10e after upgrading their iron ore forecasts. They upped their target price to 4300c from 4000c and maintained their “accumulate” recommendation. Rio Tinto (RIO) they have extended their offer for Alcan to 23 October 2007 from 24 September to allow conditions of the offer to be satisfied, including obtaining regulatory approval. RIO down 16c to 9799c. Metals mostly down overnight, Zinc down 2.5%, Aluminium down 1.5% and Copper 0.7%. Nickel up 1.4%. Zinifex down 23c to 1592c. Oil price up $1.41 to $80.55 on speculation the Federal Reserve will cut interest rates and that more Atlantic hurricanes forming. Woodside down 18c to 4622c. Gold up $6. Newcrest (NCM) up another 124c to 2640c, ABN AMRO say their shares have been re-rated since announcing they will be closing out their hedge book and as a result have upped its target price to 2444c from 22654c. The stock was up 10% yesterday after completing their $1.59bn institutional raising.

  • The AFR has reported this morning that Wesfarmers (WES) has a secret clause with the board of Coles Group (CGJ) giving it 3 days to match any rival offer. The clause was agreed as part of the revised offer by WES earlier this month. Also mentioned on the front page of the AFR was the fact that private equity firm, TPG had all but finalized a cash bid priced at 1700c a share for CGJ in mid June just before the credit crunch occurred. WES had a good session yesterday closing 79c higher after Xstrata acquired $1bn worth of coal assets from Centennial Coal (CEY). WES has a coal division valued roughly around $3bn. WES down 14c today to 3980c.
  • The heavy falls in US and UK banks overnight due to subprime mortgage concerns have dragged Aussie banks lower today; this is despite the major banks revealing minimal exposure to subprime lending and Macquarie Bank (MBL) providing strong earnings guidance last week. The National Australia Bank (NAB) has been hit the hardest, they have operations in the UK and talk is that they are preparing an opportunistic bid for Norfolk Rock to complement those existing operations. NAB down 115c or 3% to 3724c. Northern Rock in the UK continued to see massive withdrawals by depositors and their share price fell 35% having fallen 30% on Friday. Government Treasurer Alistair Darling said the British government will guarantee all existing deposits. Despite that “The images of customers queuing up in the high street has done irreparable damage to the franchise” and the crisis of confidence is expected to impact UK economic growth.
  • ABN AMRO say Qantas (QAN) is a BUY and have a 655c target price. They expect a strong start to FY08 with record load factors and see further restructuring benefits still to come. The stock is up 60% in the past 12 months.
  • Equinox (EQN) up 1c to 445c, the stock is up 19% in the last 11 days after their CEO confirmed their Lumwana copper project in Zambia is on schedule and budget for commissioning in around June next year.
  • Not all that much going on ahead of the FOMC Meeting tomorrow….apart from Greenspan launching his book clearly timed ahead of tonight’s FOMC meeting.
  • Kagara Zinc (KZL) in a trading halt pending an announcement. The stock last traded at 533c.
  • Chinese stockmarket up 2.1% yesterday to a record high despite an interest rate rise.
  • Companies going ex-dividend today include – BEL, CHD, LGD, SCB, SKE, SYB and OUS.

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