It is a sea of red today – our market is down 98 despite the SFE Futures suggesting a 50 point rise in the market this morning. Financials down 4%, Resources outperforming and providing the much needed support base for the market – up 0.4%. BHP down 4c to 3596c, it was up over 1.4% as the market initially opened. Rio Tinto up 21c to 10646c. A little disappointing from both stocks considering they were up over 8% on Friday in ADR form and 5% in London. Gold stocks up after a $19 jump in the gold price on Friday. The big story is the potential collapse of Lehman Brothers in the US tonight. The Dow Futures are predicting a horrid session on Wall Street tonight, they are down 245 points.

The Dow Jones closed down 11 on Friday. Up 27 at best. Down 153 at worst. Financials struggled on fears of further major bank failures. Barclays withdrew its bid to buy Lehman Brothers and according to The Wall Street Journal, Bank of America and Merrill Lynch are involved in merger talks – a kick in the teeth for Lehmans. Their executives are now saying that they will consider selling the company separately rather than in one piece to a single buyer. Resources and energy stocks supported the market on the back of bargain buying and a good session for metals on the LME. Inflation data came in a bit better-than-expected. Oil dropped below US$100 – lowest levels since February 26 – before recovering to close slightly higher.

  • Both BHP and RIO up substantially in ADR form on Friday, 8.98% and 9.34% respectively.
  • Metals all up on Friday – Zinc up 5.13%, Nickel 4.05% and Copper up 2.93%. Aluminium up 1.75%.
  • Oil price up 24c to $101.19 – according to federal officials, Hurricane Ike appears to have destroyed a number of production platforms and damaged some of the pipelines in the Gulf of Mexico.
  • Gold up $19.00 to $764.50.
  • Bonds down with the 10 year yield up to 3.71%

An independent assessor has said that Origin Energy’s (ORG) US$9bn sale of half of its coal seam gas assets to ConocoPhillips is in the best interests of Origin shareholders. The Grant Samuel report valued the assets somewhere between $28.55 – $30.71 per share and also said that BG’s offer was neither fair nor reasonable.

Making the news today…

  • Phil Green has stepped down as a director of Babcock & Brown (BNB). It was only last month that he stepped down from chief executive. The stock is down another 15% today to 161c.
  • Downer EDI (DOW) has been awarded a $350m road maintenance contract over the next 10 years in NSW. It takes its infrastructure division’s work-in-hand to around $2.1bn. DOW up 10c to 752c.
  • Centro Properties Group (CNP) has announced its $US714m sales agreement for its Centro American Fund has been terminated but says it remains in talks with a potential buyer. CNP down 2c to 8.5c.
  • PanAust (PNA) up 5% after releasing Puthep Copper Project drill results and on the back of a strong gold and copper price. GSJB Were continues to maintain their 140c target price and Buy recommendation.
  • Santos (STO) down 4.1% to 1856c on a report in the AFR that mudflow in Indonesia could cost it up to $930m or 10 times current provisions. The company has still not admitted liability and has said that it is appropriately provisioned.
  • Babcock & Brown Communities Group (BBC) says Prime Retirement & Aged Care Property Trust’s (PTN) share based bid for 40% of the company significantly undervalues it. BBC down 0.5c to 47c.
  • Macquarie Airport (MAP) announced it will withdraw $135m worth of convertible securities at a price of $103.45 each following a tender process. MAP down 12c to 293c.
  • Gold stocks doing nicely today after the Gold price put on $19 to $764.50. Newcrest Mining (NCM) up 6.7%, Lihir Gold (LGL) up 9.6% and Sino Gold (SGX) up 9.6%.
  • Boart Longyear’s (BLY) CEO Craig Kipp says he sees further earnings growth despite falling commodity prices and the credit crunch. BLY unchanged at 148.5c.
  • The directors of Octaviar (OCV) have placed the company into voluntary administration – it owes more than $1bn. OCV still in a trading halt – last traded at 99c.
  • Citi highlight Sigma’s (SIP) latest rally from 87c to 143c could indicate there are fundamental earnings upgrades on the way saying, “Using global deals as a benchmark for multiples, we have established a takeout range from 210c (realistic) to 290c (optimistic) per SIP share”. SIP down 10c to 132.5c.
  • Macquarie Group (MQG) down 8% – they have provided a capital and options update.
  • Westpac Banking Group (WBC) has announced issues of debt securities.
  • AMP goes ex dividend 24c.

MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.

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