dj market talk

0758 [Dow Jones] AUD/USD breaks above 0.9000 for first time in 2 months as U.S. equities rally sends risk aversion into "abeyance temporarily" on strong IBM results, says Lehman Brothers chief economist Stephen Roberts. Gold price rising above US$900 per ounce also buttressing AUD. Roberts says, however, there's very strong resistance around 0.90 area. Expect domestic data in week ahead to determine direction of pair. January consumer sentiment due tomorrow, December jobs data due Thursday; 4Q CPI due next week. AUD/USD last 0.8989 from 0.8948 late yesterday.(SRH)


0822 [Dow Jones] STOCK CALL: Merrill Lynch initiates coverage of iiNet (IIN.AU) at Buy; price objective A$2.73. Analyst expects iiNet to grow broadband subscribers to 306,000 in FY10 from 203,000 in FY07, gaining 1% market share in the process. "With very strong growth in broadband demand and a significant pricing advantage compared to competitors, iiNet is in a strong position to gain market share," analyst says. Also expects IIN to take advantage of industry consolidation. Last trade A$2.33. (SVM)


0855 [Dow Jones] STOCK CALL: Merrill Lynch keeps buy recommendation, A$34 price target, on Sims Group (SGM.AU). "Some investors believe that Sims will be hurt by the possible US recession," ML says in client note. "We argue that a weak US assists SGM main business of buying in the US and selling to Asia." Also notes outlook comments from scrap exporter Schnitzer (SCHN) were positive for the next quarter in the US. "Export demand is strengthening, domestic US demand is firming, freight markets are stabilizing, and net selling prices are likely to increase more than costs, according to Schnitzer," ML says. "We expect SGM to benefit in the March quarter. If a US recession reduces competition for scrap, SGM buying price would ease, and if Asian and Chinese demand remain strong, SGM would be poised to benefit as one of the best-placed exporters of scrap to Asia." Last trade A$25.17. (ABH)


0904 [Dow Jones] Merrill Lynch forecasts an iron ore price rise in annual negotiations of 40%, says Chinese steel mills are still ordering ore at record monthly rates. Says the Chinese have built up high levels of stocks at ports, in anticipation of a large hike in price. The India-China spot price has risen 8% in eight weeks and 140% in the past 12 months and demand remains strong. A significant rise in prices would be good news for Rio Tinto (RIO.AU), which would likely use higher prices to bolster its argument that BHP Billiton's (BHP.AU) takeover proposal is pitched too low. (APW)


0907 [Dow Jones] S&P/ASX 200 offshore leads bullish, with SFE 200 futures up 61 points at 6027.0 after solid gains on Wall Street and LME. DJIA up 1.4% at 12778.15, S&P 500 up 1.1% at 1416.25, Nasdaq up 1.6% at 2478.30 after strong results from IBM, which rose 6.1%. Citigroup rose 1.3% and Merrill Lynch rose 2.3% as expectations of capital injections offset fear of big writedowns. CBOE VIX down 0.78 points at 22.90. Spot gold up US$8.00 at US$903.80 after hitting record high of US$915.00. Nymex crude up US$1.51 at US$94.20 on cold US weather. LME copper up 1.4%, zinc up 0.3%, aluminum up 1.3%, nickel up 2.2%. BHP (BHP.AU) ADRs at A$39.18 vs A$38.24 locally. London listed BHP up 2.7%, Rio Tinto (RIO.AU) up 2.3%. Index last 5980.0. (DWR)


0911 [Dow Jones] STOCK CALL: Qantas (QAN.AU) downgraded to sell by Merrill Lynch, with broker cutting NPAT forecasts for FY09 and FY10 by 19% and 21%, respectively. Analyst still expects QAN to beat 40% pretax profit growth forecast in FY08, but argues, "rising competition, rising wage pressures, higher capital costs and a weakening economic backdrop mean that QAN is close to the end of its earnings up-cycle." QAN closed yesterday at A$5.13, down 13% in last month. (WEL)


0919 [Dow Jones] Toll (TOL.AU) outperformance may continue today after 7.6% rise to A$10.92 yesterday. Toll had fallen 24% in four weeks amid concerns over expensive BALtrans bid. Investors had also feared it would be extremely difficult to sell Virgin Blue (VBG.AU) amid market turmoil. But Toll was looking quite cheap at 13.5x forecast 2008 earnings on Friday. Bargain hunters emerged yesterday, encouraged by comments from Toll suggesting Virgin Blue sale process will continue. Toll's gearing to strong domestic economy also attracting attention, particularly since it had fallen to discount to market vs historical premium. "Toll is certainly a quality name at a discount to the broader market in a domestic economy that is still purring along," says trader. (DWR)


0920 [Dow Jones] Australian PM Rudd, Treasurer Swan to meet with RBA officials at 0130 GMT, a spokesman confirms; few details available on topic of meeting, but domestic inflation pressures likely high on agenda ahead of Feb. 5 RBA board meeting as inflation threatens to push above central bank's 2%-3% target band. Labor inherited an economy operating at close to capacity after years of strong economic growth; center-left party promising to curb government spending to avoid further fiscal stimulus, but that still may not be enough to prevent another rate hike from current 6.75% next month. Today's briefing likely to discuss prospects for domestic economy amid deteriorating global outlook, but it's unlikely to yield any specific promise of action on inflation from either government or RBA. (RAP)


0930 [Dow Jones] Goldman Sachs JBWere says Aditya Birla (ABY.AU) has posted a positive quarterly production report and output looks set to continue to improve. "This was a good quarter of production for ABY and illustrates that from a production perspective the company is now over the worst of its issues," GSJBW says. Says ABY remains undervalued compared to its peers and should be re-rated as the copper price appreciates over the course of the year. GSJBW rates ABY a Buy with a A$4.64 target price. Stock last traded at A$2.50. (APW)


0935 [Dow Jones] Expect AUD/USD to "stick" its "nose" back above 0.90 in Asian trade following rally to 2-month high in U.S. trade, says Macquarie Bank foreign exchange associate director Jo Masters; new resistance for pair at 0.9080. Notes strong economic data in recent weeks with more firm indicators likely to print, but says AUD/USD primarily captive to risk sentiment, U.S. equities markets rather than economic fundamentals. "The Aussie can only really capitalize on that strong domestic data if there's risk appetite." AUD/USD last 0.8995. (SRH)