australian equities roundup

1025 [Dow Jones] COMMODITIES SUMMARY: Gold lower Wednesday on profit-taking sparked by USD strength, equity weakness, fall in crude. Dave Rinehimer at Citigroup Global Markets, points out that decline began in after-hours trading Tuesday; general risk aversion set in as equities headed lower, he says; "There is some follow-through weakness from yesterday's sell-off." Adds, "Then we started to sell off again predominantly off of the rally in the dollar and further weakness in the energy markets. Commodity prices are generally lower today." Nymex February gold down $20.60 at $882/oz; March silver down 40.5 cents to $15.895. LME base metals lower on continued worries about U.S. recession; recent swathe of worse-than-expected U.S. figures has investors on tenterhooks, with more banking results and U.S. housing data due Thursday, so base metals not out of woods; "Concerns over the health of the U.S. economy (are) a key driver of base metals prices and sentiment," says Barclays Capital. 3-month LME copper bid down $170 at $6,990/ton, lead down $45 at $2,609, zinc down $20 at $2,280. Crude oil futures drop to fresh 4-week low as growing U.S. oil inventories combined with economic concerns to drag prices below $91 a barrel. February crude down $1.06 to $90.84/bbl. (CNG)


1026 [Dow Jones] LME copper steady after overnight sell-off following sharply lower equity markets, responds to concerns of global slowdown crimping metal demand; commodity index rebalancing period also over this week, speculators that put on short positions in anticipation of index reshuffle keen to nudge market lower to trigger sell stops, says trader. Recession fears at forefront of trading strategies, overnight U.S. industrial production data down 1%, first quarterly fall in a year. But falling copper stocks - LME inventories down another 3,050 tons Wednesday - are protecting copper from strong downside momentum, short position holders nervous. LME 3-month copper last at $7,000/ton, up $10 vs PM kerb. (EFB)


1031 [Dow Jones] S&P/ASX 200 up 0.5% at 5838.6 despite bearish offshore leads. Bargain hunting from local funds evident after Beige Book suggested U.S. economy not slowing as quickly as feared. Financials, industrials and consumer staples bouncing strongly, led by 1.5% rise in NAB and Westpac, 2.5% rise in Wesfarmers, 3.7% rise in Leighton and 2.6% rise in Brambles. Resources holding well above overnight levels, with BHP down 2.2%, Rio Tinto down 1.9%, Newcrest down 1.4%. "Eight down days in a row is worst run in seven years," says senior trader. "We have not had nine down days straight for over 10 years. Quality industrial names are finding support. We should finish up today." First resistance is former minor support and steep downtrend line at 5904. Fibonacci support at 5805.0 looks to be holding. (DWR)


1033 [Dow Jones] Macquarie keeps Outperform recommendation, A$34.12 price target, on Orica (ORI.AU). "ORI is well placed to deliver strong double-digit earnings growth over the next few years," Macquarie says. The value of ORI's Australian ammonium nitrate capacity "automatically rises given the difficulty and cost of ammonium nitrate expansions in the current environment," it says. "ORI is also an indirect beneficiary of booming global fertilizer prices and this should see stronger industrial ammonium nitrate prices in the medium- to longer-term given product substitution effects." Also cuts FY08, FY09 EPS estimates by 3% to 172.3 cents and by 2% to 205.2 cents because of constrained Australian coal production and higher corporate costs. Last trade down a cent at A$29.24. (ABH)


1038 [Dow Jones] ABC Learning (ABS.AU) enters agreement with Centrelink to provide child care services for its more than 27,000 staff. ABC has similar arrangements with Department of Defence, Commonwealth Bank, Westpac and ANZ. Deal is good news for ABC and follows Labor pledge to increase childcare rebates, but market is likely to remain focused on its U.S. operations. Stock got a boost this week from private equity bid for a rival U.S. childcare operater on bullish multiples. ABS last trade A$4.63, up 1.1% (SVM)


1041 [Dow Jones] Qantas (QAN.AU) up 6 cents, or 1.3%, at A$4.71, bouncing off 13-month low despite confirming a further 3-month delay to delivery schedule for B787 aircraft, with first of group's 65 ordered now not expected before May 2009. QAN says no impact on group earnings or strategy, but will delay Jetstar's international expansion as it plans to use the first 15 aircraft to launch long-haul flights to Europe. QAN to discuss damages with Boeing when delivery schedule finalized, but provided QAN can utilize existing fleet, the delay in capacity expansion globally is prima facie good for industry yields. (WEL)


1048 [Dow Jones] STOCK CALL: UBS says value emerging in Australia's real estate investment trusts with some shares trading at a discount to fair value. "However, we do not expect market pricing to converge to value in the short term, with medium-term catalysts required including M&A, general equities interest, global REIT fund flows, next FY EPS clarity and exit of speculative positions," UBS says in client note. Says Centro (CNP.AU) refinancing pressuring sector. Identifies three potential outperformers: Commonwealth Property Office Fund (CPA.AU), Macquarie Countrywide Trust (MCW.AU) and MFS Diversified Group (MFT.AU) and three underperformers: Charter Hall Group (CHC.AU), Lend Lease (LLC.AU) and GPT Group (GPT.AU) in the short term. Mirvac (MGR.AU) remains main pick. S&P/ASX 200 property index last up 1.7% at 1828.9. (ABH)


1052 [Dow Jones] Wesfarmers (WES.AU), Brambles (BXB.AU) and Leighton (LEI.AU) bounce strongly in early trading. Good examples of quality blue chips finding support at bargain levels after being beaten up by Wall Street plunge. Wesfarmers appears to be bottoming near August low of A$37.15, with monthly close above monthly uptrend line at A$38.15 now possible. Brambles hit record low of A$10.07, yesterday. Subsequent break above resistance at A$10.78 is first sign of bottom. On Leighton, A$47.70/A$48.00 is major support level, which looks to be holding. WES up 2.2% at A$38.04, BXB up 2.7% at A$10.84, LEI up 3.3% at A$49.15. (DWR)


1053 [Dow Jones] Zinifex (ZFX.AU) oversold and overdue for bounce, says Southern Cross Equities director Angus Aitken. Says he wouldn't be surprised if Oxiana (OXR.AU) came back with takeover proposal since OXR share price has significantly outperformed ZFX. Adds, ZFX has around A$2 billion or A$4/share cash on its balance sheet and Allegiance (AGM.AU) deal looks unlikely to close. Tips ZFX rise to A$11.00-A$11.50 near term; latest up 5 cents at A$10.07. (DWR)


1105 [Dow Jones] Qantas (QAN.AU) target price downgraded by ABN AMRO, but retains Buy rating based on record earnings result from sound cost control and growth management and wider demand. "While slowing global growth would inevitably impact demand...we remain positive on the longer-term growth prospects," says analyst. Cuts incremental value expected from planned business restructure as believes turmoil in global credit markets will mean plans for a separate fleet leasing vehicle will likely be deferred. QAN up 3 cents at A$4.68. (WEL)