Morning Market Report, Nov 01, 2007

The market is in record territory – up 52 to 6806. The SFE Futures suggested a 54-point rise in the market this morning. The Fed cut rates despite suggesting credit crunch concerns are easing whilst inflation pressures are increasing.

The Dow Jones closed up 137 overnight – It moved in a 195 point range and finished 1% higher after the Federal Reserve did what most predicted and cut interest rates for the second time this year. The Fed surprised the market last month with a larger-than-expected 50bp cut, this time they cut the rate by an expected 25bp, the fed funds rate now stands at 4.50%. In other economic news, the Commerce Department said GDP grew at an annual rate of 3.9% in the 3Q, higher than the 3% economists had predicted, and construction spending hit a 4 month high, increasing by 0.3% in September. The NASDAQ had a good session, it closed up 1.5%. Microsoft continued its good run; it closed 3.4% higher and hit a 6-year high after Sanford C. Bernstein & Co. said its shares were undervalued because of the company’s growth potential. Shares of rival Google Inc. broker through $700 for the first time, its share price is up 30% since mid-September adding $53bn to its market cap.

Resources doing well today…BHP up 80c to 4690c and RIO up 276c or 2.5% to 11275c. Were’s maintained their BUY recommendation on BHP this morning with a 4765c target price saying the outlook for coking coal remains very tight. They say BHP have the opportunity to expand production with stronger Indian and Brazilian demand in addition to Chinese coking coal potential struggling to keep up with Chinese steel production. Other brokers have target prices of 4141c and $53 this morning.

Metals mixed overnight. Nickel up 1.7%, Aluminium up 0.9%, Copper down 0.5% and Zinc down 0.7%. Zinifex up 5c to 1670c. Oil price up a big $3.83 or 4.1% to $94.16 after the government announced another unexpected drop in crude inventories this week. The Fed’s decision to cut rates again also helped the price finish in record territory. Woodside up 88c to 5288c. Gold up $7.50. The price surpassed $800 for the first time since 1980. Newcrest up 94c to 3334c. Charlie Aitken at Southern Cross Equities devotes his email to the following theme today…“The US dollar is going down…BUY Newcrest”. NCM have had their AGM today and hit a record high. They tell us they are on a global hunt for M&A opportunities although some wonder whether Barrick or Newmont might not bid for them before they get the chance.

TELSTRA UPS GUIDANCE – Telstra has an Investor Briefing Day today – It seems they have collected as much good news as they can for the day and ahead of the release of the presentations they have put out an upped earnings guidance announcement. The increase in earnings is small and to some extent some good news had been expected already and brokers have had forecasts above guidance for some time. TLS up 8c to 476c.
Westpac Final Results are out – they look to be a bit better than expected. H2 profit up 9%, 4th Q cash profit $1.829bn compares to forecasts of $1.778bn and FY cash earnings came in at $3.451m against forecasts of $3.431m. No specific earnings guidance was given. The stock is up a touch on the back of them although they have already had a strong run in the last week – strong results but were anticipated. WBC up 4c to 3058c.
The other big news today is Nufarm confirming they have had takeover talks. The stock was up 15% yesterday on a press article saying they turned down a bid at 1710c two weeks ago. Now in a trading halt at 1560c pending an announcement.
Straits Resources (SRL) up 18c to 656c after announcing this morning it will boost its coal operations in Indonesia.
Flight Centre up 85c or 3.5% to 2516c on their AGM. They reiterate earnings guidance for 15% growth and say they are looking for international acquisitions.
Monadelphous have announced a $180m contract. MND up 15c to 1699c.
Fortescue have put out their quarterly report. They say the project is on schedule to ship its first iron ore in May 2008. All good. FMG up 88c to 5088c.
Oil Search have put out a 147 page “Investor Field Trip” presentation. Main price driver is a FEED decision on PNG LNG expected by year end. OSH up 12c to 437c.
Suncorp-Metway (SUN) said that higher costs will result in $10m to $15m being stripped from its profit result this year. SUN down 23c to 2005c.
St. George Bank (SGB) announced results yesterday – they were as expected and towards the top end of company guidance. Most brokers upped their target prices this morning but remain concerned about a CEO appointment.
The Australian Industry group tells us Australian performance of manufacturing index increased 2.6 points in the last month to 53.3 points. Any PMI reading above 50 suggests expansion. It was the 17th consecutive month of growth.
Coming up: Melbourne Cup Carnival starts with Derby Day this Saturday, Cup Day Tuesday (markets closed), Oaks Day Thursday and Stakes Day Saturday. RBA Meeting on Tuesday.
Companies going ex dividend today include: CIW, FFI and SOL.