US Recovery Could Extend Into The First Half Of 2010

December 18th, 2009  by Neil Gynther

Closing Data

	Current	Change	%
Dow Jones	10308.26	-132.86	-1.3%
NASDAQ	2180.05	-26.86	-1.2%
S P 500	1096.07	-13.11	-1.2%
FTSE 100	5217.61	-102.65	-1.9%
Nikkei 225	10163.8	-13.61	-0.1%
ASX 200	4,648	-22.5	-0.5%
COMEX Gold - Dec 09	1107.2	-29	-2.6%
COMEX Silver - Sep 09	17.2	-0.493	-2.8%
COMEX Copper - Sep 09	312.5	-8.05	-2.5%
WTI Spot	72.65	-0.01	-0.0%
AUD-USD	0.887	-0.0134	-1.5%
Aluminium	2241.5	37.5	1.7%
Copper	6946	145.5	2.1%
Lead	2368	74	3.2%
Nickel	17210	480	2.9%
Tin	15325	65	0.4%
Zinc	2371	95	4.2%

Dow Jones S&P/ASX 200 offshore leads bearish, with overnight SPI 200 futures down 32 points, or 0.7%, at 4626.0. S&P downgraded Greece, triggering U.S. dollar strength, which weighed on equities and commodities. DJIA down 1.3% at 10308.26, S&P 500 down 1.2% at 1096.07, Nasdaq down 1.2%. EUR/USD fell 1.3% to 1.4340 after S&P cut Greece's credit rating to BBB+.

The U.S. economic recovery probably will extend into the first half of 2010 after the index of leading indicators rose in November for the eighth consecutive month. Philadelphia area manufacturing rose and weekly jobless claims rose to 480,000 vs 465,000 as expected. FedEx fell 6.1% on a disappointing earnings  forecast. S&P 500 Financial Sector index fell 1.8% as Citigroup fell 7.3% after a heavily discounted stock offering, while Goldman Sachs fell 2.5% and Morgan Stanley fell 4.0%. Prominent analyst, Meredith Whitney, lowered her EPS estimates on those banks through 2011. The S&P GSCI Index of 24 commodities fell for the first time in six sessions, losing 0.8 percent.

The US Dollar rose to the highest level in three months while stocks and commodities slid as investors fled risky assets on concern the global economic recovery will stall. Ten-year Treasuries jumped the most since October.
The U.S. currency advanced against the 16 most-traded peers and the Dollar Index, which tracks the dollar against six major trading partners, surged 0.9 percent to 77.714.

Commodities:

Oil slipped as a direct result of rising US jobless claims, which raised concerns regarding a rebound in the economy.
Gold fell 3% on the back of the US$ rally  and copper, lead and nickel prices decreased in London.

The Australian Market:

The S&P/ASX 200 closed up 8 points, with the only two sectors, Financial and Consumer Staples, experiencing falls.
The AUD fell to US$0.8883.

The National Australia Bank launched a takeover bid for AXA Asia Pacific (AXA AP) at $6.43 p/share. This means that the National Australia Bank will take over the Australian and New Zealand businesses ($4.6B), while AXA SA acquires the Asian Operations.

Happy outcome

Woodside's completion of the institutional component of its $2.5 billion accelerated renounceable entitlement offering.
Woodside raised $1.7bn, or 68 per cent, of the issue with more than 93 per cent of eligible institutional holders (including Shell's 34.27 per cent) taking up their entitlement at the issue price of $42.10 a share.

The clearing price of the shortfall bookbuild was $45 a share, slightly below the theoretical ex rights price (TERP) of $46.78, but still provides non-participating holders with a payment of $2.90 for each new share not taken up.
Moreover, Woodside shares resumed trading yesterday and closed at $46.65 which means those who took up their entitlement are ahead by $4.55 a share.

If the price holds up for the next seven weeks it will provide a strong incentive for retail holders to subscribe to their $800m component of the offering.

The equity offer will lower Woodside's gearing from 37 per cent to only 15 per cent.
That should please the major ratings agencies S&P and Moody's, which had been threatening a downgrade if Woodside opted for more debt rather than equity.

Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.

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