Morning Market Report, Sep 17, 2007

The market has started the week off down 36. The SFE Futures suggested a 7 point rise in the market this morning.

The Dow Jones finished 17 points higher – It moved in a 136 point range and finished slightly higher despite weaker-than-expected economic numbers and credit crunch concerns reappearing after the Bank of England had to grant emergency funding to UK lender Northern Rock. August retail sales and industrial production numbers both came in weaker-then-expected. Consumer spending was up 0.3% last month, less than the 0.5% increase economists had predicted, and the Federal Reserve announced industrial production gained a soft 0.2% last month. Resources had a good session on the back of stronger commodity prices, Merrill Lynch & Co. said Alcoa (up 3%) could boost profit margins by acquiring venture partner Alumina, and homebuilders rebounded after Hovnanian Enterprises said the bottom of the housing market is “very near”. The Dow Jones index had its best week since April, it closed up 2.5%, the S&P 500 put on 2.2% and the NASDAQ finished 1.4% higher.

Resources mostly down today…BHP down 55c to 3885c. They announced that their plans for an expansion of their huge Escondida copper mine in Chile does not have a price tag yet, nor has it reached pre-feasibility stage contrary to media reports suggesting a $US1bn cost. RIO down 119c to 9820c, they were at Goldman Sachs JB Were’s London conference and remain bullish on Chinese demand for resources saying “commodity prices may not have peaked as yet”. Metals mixed on Friday, Nickel up 2.4%, Copper up 0.2%, Aluminium down 2.1% and Zinc down 0.7%. Zinifex down 11c to 1617c. Oil price down 91c to $79.14 despite hitting an intraday high for the third consecutive day. It finished lower for the first time in ten sessions as traders locked in profits. The oil price put on 3.1% last week and is up 25% from this time last year. Woodside (WPL) down 28c to 4650c, they announced their Otway Gas plant in Victoria has now been commissioned with gas being processed and delivered. Gold down 10c. Newcrest has begun trading again after being in a trading halt for most of last week. The stock is up 236c or 10% to 2524c.

Oil Search (OSH) flying today, up 15% to 441c after the South China Morning Post reported CNPC Exploration is considering launching a takeover bid worth US$4bn-US$5 bn, giving a bid range of 430c-540c. OSH said they have had no takeover approach as yet.
Not good – Sims Group (SGM) announced this morning they expect earnings in the 1Q to be below $60m, a little off the $68m guidance provided by the company earlier in the year. Management did say the global environment for metals prices will remain strong, but this will be offset by increased competition to source material. SGM down 38c to 3276c.
Transfield Services (TSE) announced they have acquired US based VMS Inc for US$29.5m. The deal, which is expected to be completed in October, will be funded by existing debt and represent an EBITDA and amortization multiple of 8.3x based on VMS’s forecast earnings for fiscal 2007. TSE also needs to get the all clear from US regulators. The stock is up 2c today to 1260c and 52% in the past 12 months.
National Australia Bank (NAB) down 63c or 1.6% to 3837c. Talk is that they might bid for Northern Rock considering they have UK operations. Northern Rock (top 5 mortgage lender in the UK) has been bailed out by emergency funds from the Bank of England – it is the first UK lender that has had to be rescued since 1973.
Babcock & Brown Infrastructure Group (BBI) announced plans to buy back up to 147.1m of their ordinary stapled securities worth around $245.7m. They announced last month they were entering into a $518m debt facility and were able to buy back around of 10% if their stock.
JP Morgan say OneSteel (OST) remains their preferred steel stock. They have a 700c target price but say steel earnings appear softer in the second half of this year. OST up a big 18% last month.
A heap of companies going ex-dividend today: ADB, ARJ, AUW, BXB, CEY, CSL, FLT, MMA, MLB, WWA to name a few.