Morning Market Report

The market is up 14. The SFE Futures suggested an 8 point rise in the market this morning.

The Dow Jones closed down 8 moving in a big 200 point range and closed slightly lower for the second consecutive session on inflation concerns (oil price up) and on lingering worries about the subprime mortgage market affecting the credit markets (enough to scare off some of the leveraged ambitions of private equity). The Dow was up 110 at one point. In economic news, the University of Michigan’s monthly index of consumer sentiment fell more than expected in June, and the US Department of Agriculture announced farmers planted 92.9m acres of corn in last year, the higher since World War II and 19% higher than last year. Apple Inc. closed 1% higher; they released their iPhone to the public. Bear Stearns fell 2.8% after the US Securities and Exchange Commission announced they would start an informal inquiry into the company. It was a strong 2Q for all three major indexes – the Dow Jones increased 8.5%, the S&P 500 put on 5.8% and the NASDAQ increased 7.5%.

Resources have started the week off quietly. BHP up 7c to 3510c and RIO up 1c to 9880c. Metals mostly down on Friday, Aluminium down 0.5%, Zinc down 1.2% and Nickel 1.5%. Copper up 0.3%. Zinifex down 3c to 1873c. Oil price up 86c and closed above the $70 psychological mark on concerns about a gasoline shortage in the US at the busiest time of the year. Woodside up 36c to 4611c. Gold up 50c. Newcrest up 15c to 2300c.

Bad month but good half year — the S&P/ASX200 finished June 0.2% lower unable to maintain its recent strong momentum. Energy, Materials and Industrial sector outperformed; Telecom, REIT and Consumer Discretionary sectors lagged. The S&P/ASX200 closed 12.7% up for the first half of the year and is up an impressive 23.7% since June 30 2006.

• Coles Group (CGJ) and Wesfamers (WES) are in a trading halt pending the outcome of takeover talks. Talk is that WES upped the equity component of their offer to 60% from 40%. Good news for mum and dad investors wanting roll over relief. The new Wesfarmers bid is thought to be at 1700c to 1725c. We wait to see if they can get management approval. WES last traded at 4573c and CGJ 1612c.
• The AFR has reported this morning that Seven Network’s (SEV) magazine division Pacific Publications has bought four Time Inc. Australian magazine titles for $90m. Talk is that they outbid News Corp who offered $85m – their major rival is PBL Media ACP Magazines, the two have been going head to head for a while.
• Also worth mentioning SEV upped their stake in GRD Ltd (GRD) to 12.2% from 10.4% on Friday, the same day GRD announced it had received an offer from Transfield (TSE). The AFR believes SEV could be putting together a mining services company. SEV down 17c to 1138c and GRD unchanged at 282c.
• Santos (STO) has completed their $320m off-market share buyback with the price set at 1216c. They bought back 4.1% of their issued capital at the maximum discount of 14%. The stock is up 35% in the past 3 months. STO down 10c to 1384c today. Last week Macquarie downgraded STO to UNDERPERFORM with an 1151c target price.
• Billabong (BBG) up 19c to 1814c after announcing this morning they have reached an agreement to acquire their licensed business in South Africa. They expected the business, which includes a wholesale distribution channel along with outlet stores, to represent around 2% of the groups FY revenue in the 2007/08 year. Talk of a bid for Quiksilver in the US may add a bit of spice.
• Smoking bans have come into effect in NSW and VIC as of yesterday. When the same thing happened in QLD pokie revenue fell 10% and 40% in certain pubs and clubs. It will keep Tabcorp and Tattersall’s under a cloud with the risk to earnings more likely to be on the downside (although the market has anticipated this already). TTS up 4c to 474c and TAH down 4c to 1710c.
• AED Oil (AED) up a huge 142c or 18.8% to 897c after announcing late Friday the possibility of recovering more than 100 barrels of oil. Not bad timing at all considering the oil price closed above US$70/barrel on Friday.
• Deutsche Bank have upped their target price on Woodside by 25% to $55 from $44. They have a BUY recommendation. Price now 4640c up 65c.
• MacArthur Coal (MCC) announced their major Chinese shareholder CITIC upped their stake in the company to 19.99% from 11.62%. The Board says it fully supports increased shareholding. MCC up 20c or 3% to 697c.
• The Aussie dollar hit an 18 year high of 85.37c early Sunday morning.
• There is an RBA meeting on Tuesday – unlikely to see any change in rates.

In MARCUS TODAY we have an article “Last Year and Next” including a summary of the market’s performance in the past financial year (don’t worry – it’s a short one – there’s enough re-capping going on elsewhere). We also include the key themes that could effect your portfolio in the year ahead.

We also have an article all you budding Self Managed Super Fund managers should have a read of – they don’t tell you all the bad bits when you sign up for the burden, sorry, responsibility of running your own fund.

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