Morning Market Report, Jun 20, 2008

The market is down 41. All sectors down despite the US closing up. Industrials down 2% and Telecoms down the most – 2.2% – with Telstra bring the index down 6 points single-handedly. SFE Futures up 28.

Dow closed up 34. Up 86 at best. Down 51 at worst. 9 out of 10 sectors up – only energy down after rising 17% over the last year. Citigroup announced it would post further losses from subprime exposures this quarter – similar in magnitude to last quarter. Treasury Secretary Paulson said some institutions are finding it challenging to revalue assets and that further capital raisings will “continue to broaden.” Financials dropped 2% at lowest but finished 0.9% up. BB&T Corp shunned rumours and announced it would lift its dividend this year – encouraged financials. Regional Banking sector fell less than 0.1% after dropping 5% in early trading – good to see some consolidation after last couple of down days. Insurer American International Corp, rose the most on the Dow – up 4.9% – as they were upgraded to BUY by Citigroup. 17 of 18 semiconductors up – sector up 2.5% as Intel (the world’s largest chip maker) rose 2.56%. Lower oil prices lifted the Transportation Index 3.4% and boosted the Amex Airline Index more than a whopping 10%. Large insurers dragged down by Coventry Health Care’s worst day on the market for 9 years. Jobless claims up– but steady on monthly averages. Philadelphia Fed Regional Manufacturing Index down more than expected. Leading Indicators climbed 0.1% to match previous month.

Both BHP and RIO up in ADR form overnight, 1.5% and 0.34% respectively. BHP up 21c to 4520c. RIO up 68c to 13951c.
Metals mostly down – Nickel down 3.6%, Zinc down 2.6% and Aluminium down 0.6%. Copper up 1.1%. Zinifex down 19c to 853c.
Oil price down $4.66 or 3.5% to $131.88 after China announced plans to raise caps on gasoline and diesel fuel prices, a move that could reduce global demand. Woodside down 145c to 6405c.
Gold up $10.70 to $904.20. Newcrest down 40c to 2748c.
US Bonds down with the 10 year yield up to 4.20%.

Transurban have successfully completed its $659m placement priced at 549c. Macquarie Equities actually upped their recommendation on Transurban yesterday to OUTPERFORM from Neutral. They have a 691c target price, contrary to predictions yesterday that the stock would re-open below $3. TCL being punished for a 60% fall in forecast FY09 yield, despite the positive move by CEO to restructure the capital management policy of the firm. TCL down 12.8% or 70c to 471c in early trading. UBS also maintain their BUY and 679c target price.

Macquarie Infrastructure (MIG) announces 10c distribution for 6 months to June 30 and 20c distribution guidance for next FY. Implies yield of 8.1% compared to Transurban’s (TCL) 4.6%. Coverage of distributions by proportionate earnings are 50-60% – it’s in the spotlight now – could wipe out half of distribution if they follow Transurban. Says cash balances in excess of $900m at May 31. Gearing 46.5%. MIG down 12c to 256c.
B&B Power (BBP) down 20% in early trading to 57.5c – slashed two stops down from Outperform to UNDERPERFORM by Credit Suisse after BBP cut final dividend and lowered FY09 earnings and dividend guidance.
Qantas Airways (QAN) April’s revenue seat factor (seat fills across its domestic and international flights) was 1.8% down on-year to a measure of 79%. Domestic seat factor down 1.6% to 80.6%. International down 1.9%, also to 80.6%. QAN up 4c to 316c.
Incitec Pivot (IPL) announced production issues at Phosphate Hill yesterday – Merrills cut FY08 earnings forecast by 8%. Fell 7.4% on open. IPL down 5% – down 1030c to 18940c.
Indophil Resources (IRN) has accepted a $1.28 /share, $540m cash offer from the Alsons Group / Hong Kong-based Crosby Capital Partners consortium – the offer is at a 94% premium to the last closing price. This is a 28% premium to Xstrata’s existing offer of $1 per share. IRN rocketing – up 20% to 138.5c.
FKP Property Group (FKP) responds to off market $5.00 /share $1.3bn takeover approach by Lend Lease – says the offer substantially undervalues FKP – the offer represented a 32% premium to last trading price. FKP boosted 23% on the bid – up 85c to 465c.
Mirvac Group (MGR.AU) cuts earnings guidance after carrying value of assets by 3% to 5% ($300-$400m) Earnings guidance now 31.4-34.3c, down from 34.3c. MGR down 6c to 312c.
Macquarie Airports (MAP) says Qantas’ and Virgin’s capacity cuts only has a 2% affect on seats on an annualized basis – says load factors and flight substitution impact on traffic should be significantly lower. Core traffic passenger growth strong at 7% in May. MAP down 5c to 228c.
Australian Worldwide (AWE) – NZ Oil and Gas increased estimates at the Tui Oil field to 50.1m barrels, almost doubling the size of initial estimates. AWE down 13c to 396c.
Cabcharge (CAB) has increased its holding in UK operations, ComCab, from 26.4% to 39.2%. CAB down 5c to 800c.
Healthscope Limited (HSP) – have entered into a commercial supply agreement for PapType detection test from Genera Biosystems (GBI). HSP up 15c to 429c.