Market Talk...

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    Monday July 8, 1:37 PM
    MARKET TALK/AU-EQ: Gold Erases Losses After Merck News
    Contact Us: Sydney 61-2-8235-2950; [email protected]
    1538 [Dow Jones] Accounting controversy at big U.S. corporate Merck, coming on heels of Friday's accounting shock at Reliant Energy, erases gold's losses as market expects U.S. equities to fall later, says Martin Mayne of NM Rothshild & Sons (Australia); "without the news, gold would certainly have been lower." Gold now up 15 cents at US$311.45/oz vs late London, after touching US$310.30 amid selling from longs post-July 4. (WCP)

    1518 [Dow Jones] Macquarie Communications Infrastructure Group has appetite for further broadcast transmission acquisitions with its eyes on Europe and Canada. "There are a number of opportunities that we have got under consideration," says CEO Scott Davies. Would like to see deals starting to crystalize in next 6-9 months; fund would look to raise additional capital as needs arise. MCIG comments supporting issuer Macquarie Bank's (MBL) shares currently up 31 cents at A$27.88. (HGU)


    1529 [Dow Jones] STOCK CALL: Salomon Smith Barney reiterates out perform rating on both BHP Billiton (BHP) and Rio Tinto (RIO). Says while economic cycle depressed, leading indicators improving and industrial production appears to be slowly turning. Says "with limited downside, fair valuations and considerable upside, we would accumulate both stocks." Has peak-of-cycle share price target for BHP Billiton of A$13.50 and for Rio A$45.00 v slatest A$10.46 and A$35.70 respectively. (AND)

    1525 [Dow Jones] Australia government bonds recover ground on new accounting revelations by U.S. drug group Merck, which may send U.S. stocks lower later today, says Jonathan Hale, chief trader at Westpac; adds next 6 months for U.S. stocks carry major risk, tilting balance away from a further RBA rate hike. September 3-year bond futures now down 6 bps at 94.24, but up from open at 94.15. (JEG)

    1523 [Dow Jones] STOCK CALL: Deutsche Bank says recent strength in world steel prices, gathering pace of international industrial production cycle favorable for BHP Steel's (BSL) ASX listing mid-month. However, analyst says volatile nature of steel prices together with rising AUD creates uncertain earnings outlook, believes 10%-15% discount to A$2.87/share assessed valuation is warranted, accordingly suggests A$2.45-2.60/share entry price. (RAT)

    1450 [Dow Jones] Though sentiment toward U.S. stocks likely to be hurt by Wall Street Journal report that Merck recorded $12.4 billion in revenue that wasn't collected, the controversy may not develop into Enron- or WorldCom-style scandal; Merck says its revenue-recognition policy conforms to generally accepted accounting principles, and there's no indication at this stage that regulators taking any action vs Merck. Also, there's no indication controversy poses any threat to Merck's financial health; Merck says its accounting treatment has no effect on its net income.(AXT)

    1445 [Dow Jones] STOCK CALL: Deutsche Bank notes formalities of merger between Brian McGuigan Wines (MGW) and Simeon wines completed on June 28; says focus now on integration, improving efficiencies and realizing synergies. Analyst is positive on merger as it provides scale, security of long-term grape supply/processing and good cash-flow to support brand growth. Buy rating retained on merged entity, which will be renamed McGuigan Simeon Wines. MGW down 4 cents at A$4.81 latest. (RAT)

    1441 [Dow Jones] STOCK CALL: Deutsche Bank says Perpetual (PPT) appears well placed to post continued strong earnings growth in FY02, underpinned by further strong fund inflows and an ongoing improvement in several previously underperforming business units. Analyst reiterates buy recommendation given healthy EPS growth profile (and track record for delivery), strong ROE and under-geared balance sheet. Target price is A$48.00 vs current A$42.59, up 1.9%. (RAT)

    1438 [Dow Jones] USD and U.S. stock futures extend losses moderately on news of $12.4 billion accounting controversy at Merck; Nasdaq futures down 1.7% from Friday's U.S. close (down 1.2% before news), USD/JPY flirting with 119.00. Nikkei briefly slips into negative territory. Investors worry news may cut short any Wall Street rebound indicated by Friday's rally; unlike WorldCom and Enron, Merck was a top-quality and well-established blue chip, so if its books are suspect, few may be safe.(AXT)

    1433 [Dow Jones] AurionGold (AOR) trying to keep pressure on suitor Placer Dome (PDG) to sweeten offer, reporting encouraging exploration success at Kanowna gold mine that may boost reserves. Shares rose to intraday high of A$3.71 following announcement. Now down 3 cents at A$3.70, still holding significant premium to Placer all-share bid now worth around A$3.33. May provide excuse for Placer to raise bid slightly as July 24 closing date approaches. Appears as though significant increase in bid depends on counter bidder for which hopes are dwindling. (AND)

    1429 [Dow Jones] AUD/USD remains supported above 0.5600, with 0.5635 expected to be next upside target, Sydney dealers say. AUD move higher driven by USD weakness against both JPY and EUR, with Asian portfolio managers reportedly heavy buyers of EUR/USD, and AUD/USD stops may be triggered on a move through 0.5635. AUD/USD now 0.5626. (JEG)

    1419 [Dow Jones] Macquarie Communications Infrastructure Group forecasting cash distributions of 15 cents, 22 cents and 29 cents/security for June 2003, 2004 and 2005 financial years respectively. Distribution reflects yield of 7.7% in FY03, rising to 14.4% in FY05. Forecast IRR for key Broadcast Australia Business is 20.5%. Company hoping investors will be attracted to stable and predictable returns; 155 million stapled securities being issued at A$2.00. Macquarie Bank (MBL), which is listing MCIG, up 46 cents at A$28.03 after terms released to market. (HGU)

    1412 [Dow Jones] AurionGold (AOR) shares to improve on Kanowna Belle drilling success. Chief operating officer Louis Rozman says "the exciting results from this latest drilling show great potential for further reserve increases at Kanowna Belle." Notes results are additional to those that were incorporated in 25% reserve increase announced two weeks ago. AOR shares improving since announcement, down just 3 cents at A$3.70 having traded as low as A$3.66 today. (RAT)
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