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Date Posted: 16:48:18 06/21/10 Mon
Author: Visa and MasterCard==Monday 21/6/2010==US
Subject: Alcoa (first company to report US earnings season April 12th after bell (April 13 Oz time 2010)

MORNINGSTAR MORNING NOTES
Tuesday 22 June 2010
Overseas Market Report
Australian Market Report
Company Updates


Overseas Market Report -Cut to BNP's Debt Rating Weighs
A pledge from China to make its exchange rate more flexible boosted materials companies including Alcoa and United States Steel and industrials such as 3M, but gains elsewhere fizzled out as a cut to BNP Paribas's debt rating reminded investors of Europe's economic woes.

The Dow Jones Industrial Average dropped 8.23 points (0.08%) to 10,442.41, its first drop in five sessions. Alcoa jumped 61 cents (5.5%) to $11.72, and 3M climbed 29 cents (0.36%) to $81.47, as investors' expectations for global demand and growth rose after China said it would drop its currency's two-year-old informal peg to the US dollar.

However, the euphoria over China's move faded after Fitch Ratings downgraded its debt rating on BNP Paribas by a notch, citing "structural issues" linked to the French bank's business mix. The euro moved to an intraday low against the dollar following the move, which lowered Paribas's long-term issuer default rating to AA-, three steps below the highest rating of AAA. American depositary shares of BNP fell 38 cents (1.2%) to $30.72.

Among the Dow's decliners, Microsoft dropped 49 cents (1.9%) to $25.95, while Home Depot declined 51 cents (1.6%) to $31.43, and Merck slipped 55 cents (1.5%) to $35.12.

The Nasdaq composite tumbled 20.71 (0.9%) to 2,289.09, snapping a seven-day winning streak and marking the measure's biggest one-day drop in two weeks.

The Standard & Poor's 500 index slid 4.31 (0.39%) to 1,113.20. All of the measure's sectors fell except materials and industrials, which were considered among the biggest potential beneficiaries of China's plans to make its exchange rate more flexible. Among the materials sector's gainers, United States Steel jumped $1.56 (3.6%) to $44.97, while Freeport-McMoRan Copper & Gold climbed $2.18 (3.3%) to $68.08.

Shares of card companies Visa and MasterCard shot higher after US House and Senate Democrats said they reached an agreement that would prevent the Federal Reserve from having wide-ranging authority to regulate network fees, a benefit for Visa and MasterCard because of the reduced oversight over the fees they charge and accrue. Visa jumped $3.86 (5%) to $80.90, while MasterCard advanced $9.08 (4.2%) to $223.34.

US-based Valeant Pharmaceuticals International rose $1.03 (2.3%) to $46.90, and Canada's Biovail climbed $2.07 (14%) to $16.67, after the companies said they plan to merge to create a specialty pharmaceuticals group focusing on neurological products, dermatology and generic medicines in Canada and emerging markets.

Corn Products International fell $2.95 (8.5%) to $31.90, after the food manufacturer announced a $1.3bn acquisition of National Starch. While the proposed deal is seen as accretive by the end of next year, investors are concerned the additional debt burden may also make Corn Products more of a mouthful for perennial suitor Bunge Ltd. to digest. Bunge edged up 80 cents (1.5%) to $54.04.

Global Payments tumbled $3.72 (8.7%) to $38.89, after the company disclosed that Canadian Imperial Bank of Commerce wouldn't renew a 10-year agreement with the credit-card processor that had allowed it to process Visa transactions in Canada.

PPL Corp. slipped 40 cents (1.5%) to $25.66, after the utility company said it has arranged a "significant portion" of its financing for its $6.7bn acquisition of E.ON AG's US operations. PPL plans to sell at least 90m shares and a minimum $1bn of so-called equity unit securities to help fund the deal, announced in April.

For Australian ADRs listed on the NYSE, BHP Billiton gained $1.58 (2.33%) to US$69.41, Rio Tinto Plc advanced $1.24 (2.51%) to US$50.71, ResMed climbed 28 cents (0.44%) to US$63.65, Telstra Corporation rose 55 cents (3.9%) to US$14.65, Telecom Corporation of NZ firmed 9 cents (1.36%) to US$6.73 and Westpac added $1.08 (1.05%) to US$103.71.

At 7:45 AM (AEST), the 10-year Treasury note yield was 3.24% and the five year yield was 2.02%.

European shares climbed on Monday, extending the best winning run in 11 months, with miners standing out after China announced its intention of moving toward greater currency flexibility.

The Stoxx Europe 600 index rose 1% to 257.92 for the ninth straight advance, the first time that's happened since the nine sessions ending July 23, 2009.

Monday's gains came after China stated over the weekend that it will loosen the yuan's defacto peg to the US dollar.

Miners are leveraged to economic growth and the move from China also helped alleviate worries about possible interest rate hikes for the country, a key customer for many mineral extractors.

Miners rallied along with metal futures, with Vedanta Resources up 6%, Norsk Hydro gaining 3.1% and Nyrstar up 2.9%, with the copper contract in particular getting a boost.

The UK FTSE 100 index rose 0.9% to 5,299.11, the German DAX index rose 1.2% to 6,292.97 and the French CAC-40 index advanced 1.3% to 3,736.15.

European exporters were also strong, with firms producing luxury items in particular doing well.

BMW shares advanced 2.7%, Mercedes maker Daimler climbed 3.2%, Swatch shares climbed 4.7% and Richemont shares rose 4.1%.

BP couldn't join in the advance on Monday, trading down 2.2%. The firm, which is battling to stem a massive oil spill in the Gulf of Mexico, said that the total cost to date of the response to the spill has reached $2bn, including the costs of containment, relief well drilling, grants to gulf states and claims paid.

On the FTSE 100, Rio Tinto strengthened 165.00 pence (4.96%) to 3,522.28 pence and BHP Billiton gained 91.50 pence (4.72%) to 2,031.90 pence.

Asian stocks were sharply higher on Monday, while regional currencies and the euro rose against the US dollar after China decided over the weekend to allow greater flexibility in the yuan's exchange rate.

Japan's Nikkei Stock Average gained 2.4%, The Hang Seng Index jumped 3.1% and The Shanghai Composite Index added 2.9%.

New Zealand shares ended higher as risk appetite improved after China's decision over the weekend to allow greater flexibility in the yuan's exchange rate. The NZX-50 ended up 0.7% or 20.75 points at 3,068.25.

Base metals ended higher despite being substantially reined in following strong early gains. Analysts predict the market will hold relatively steady in the week ahead until further details of China's plans to abandon its currency peg are released. Aluminium rose $10 (0.52%) to $1,950 while copper firmed $130 (2.02%) to $6,550 and nickel added $30 (0.15%) to $19,630. Zinc strengthened $30 (1.72%) to $1,770 and lead gained $55 (3.15%) to $1,800. Comex copper was last quoted at 293.00 US cents per pound.

Gold futures pulled back from record highs as rallies in equities and commodities reduced investor appetite for safe-haven assets. Spot gold was last quoted at $1,233.40. Comex gold futures dropped $17.60 (1.40%) to $1,240.70. Spot silver was last quoted at $18.70.

Crude oil settled higher as investors reacted to news over the weekend that China's central bank planned to take steps to allow the yuan to appreciate against the US dollar. West Texas Intermediate was last quoted at US$77.82 per barrel.

At 07:45 a.m. (AET) the US dollar was quoted at 0.8123 euros, 91.04 yen, 1.142 AUD and 67.76 pence.

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Australian Market Report -Mixed Leads for Local Stocks
Local stocks may be mixed today as markets closed lower overnight in the US, however, higher commodities could get a boost.

Ahead of the local open the September SPI futures were 30 points lower at 4,569.

Market and Company News | Monday 21 June 2010 - close

BHP Billiton (BHP) and Rio Tinto (RIO)

BHP and Rio said they have agreed to pay higher royalties on their iron ore operations in the Pilbara region of Western Australia. While the agreement with the WA state government isn't conditional on their planned iron ore joint venture proceeding, it looks designed to win support from the government for the deal. Under the agreement, royalty rates will rise to 5.62% of iron ore fines sales revenue from 3.75% previously while the rate for lump will be set at 7.5%. BHP said the change would add $350m to the state's consolidated revenue and that, under changes to the state agreements, the two companies would be allowed to share infrastructure and blend products. BHP increased 78 cents (1.99%) to $39.91. RIO rose $1.49 (2.1%) to $72.34.

Telstra (TLS)

Telstra has struck an $11bn agreement with the government's planned $43bn national broadband network. Under the nonbinding agreement announced Sunday, Telstra will allow NBN Co to use its copper and cable network assets, such as its pits and ducts, as NBN Co rolls out the government's nationwide new fibre to the home network. It has also agreed to progressively roll over its fixed voice customers to the new network. Importantly, the company has also received assurances from the government that if the deal goes ahead, it won't be barred from buying new mobile spectrum and won't be forced to divest its half stake in pay television group Foxtel.

A final contract is expected to be negotiated in the coming months, with a final agreement to be put to Telstra shareholders for their approval in the first half of 2011. Telstra Chief Executive David Thodey said that he was yet to seek feedback from the group's bigger institutional shareholders on how the view the deal. TLS rose 11 cents (3.41%) to $3.34.

Fortescue Metals (FMG)

Fortescue and China Gezhouba Group have formally agreed to talks on an engineering and procurement role for the Chinese company at the Chichester iron ore hub in WA, Fortescue said. They said that China Gezhouba not only offers engineering, procurement and project management expertise, but its relationship with China's export credit agencies may also create a source of competitively-priced finance. FMG improved 20 cents (4.58%) to $4.57.

Orica (ORI)

Orica said it will expand its Kooragang Island ammonium nitrate plant in NSW by almost 75% to meet an expected increase in demand from the mining sector in south east Australia. Orica said annual output at the plant would increase by 320,000 tonnes to 750,000 tonnes under the plan, which has been approved by the NSW state government. The company said it had approved $75m for engineering planning and to secure long lead items, with the total cost of the project expected to reach $600m- $750m and commissioning likely to begin in 2014/2015. ORI fell 11 cents (0.41%) to $26.74.

Leighton Holdings (LEI)

Leighton has signed a non-binding agreement to sell a 26% share of its Indian construction business for US$400m to Jindal Group of India, a newspaper has reported. Leighton is also to sell its 49% stake in two toll roads in India with a book value of US$45m to Jindal or another party. LEI firmed 19 cents (0.59%) to $32.46.

SP Ausnet (SPN)

A class action has been lodged against SP Ausnet, a member of Singapore Power group, alleging the company breached safety guidelines causing a bush fire in which 119 people died in Victoria, it has been reported. Over 600 people have signed up to the class action, which follows a similar action filed against Powercor last year over a fire which destroyed 12 homes. SPN fell 3 cents (2.96%) to $0.82.

David Jones (DJS)

David Jones has appointed a third-party investigator to examine any further allegations that may arise in connection with former chief executive Mark McInnes' conduct, a spokeswoman for the company said. McInnes resigned from David Jones on Friday, admitting he engaged in behaviour "unbecoming of a chief executive to a female staff member" at two company functions. The employee's lawyer contacted the board of David Jones about McInnes' conduct and, on Friday, the board announced his departure and the appointment of Paul Zahra, longtime member of the company's management team, as his replacement. The company is reviewing its records and has yet to find another complaint lodged against McInnes, the spokeswoman said. DJS weakened 2 cents (0.45%) to $4.47.

GUD (GUD)

GUD launched a capital raising for up to $55m as it nears completion of a friendly $83.8m takeover offer for storage product provider Dexion. Its $40m institutional placement has been fully underwritten by JP Morgan and Macquarie at $8.30 a share, which is a 4% discount to its last traded price of $8.65. In addition, the company will attempt to raise up to $15m from a non-underwritten share purchase plan. GUD said it could comfortably buy Dexion with existing cash reserves but is raising capital to maintain its balance sheet position. Turning to its expected annual profit result, GUD said it expects its earnings before interest and tax for the year to June 30 to be at the top end of its previous guidance of $64m-$68m. GUD remained in a trading halt.

Sigma Pharmaceuticals (SIP)

Sigma warned it is unlikely to meet its budget this fiscal as its generics division continues to struggle. Chairman Brian Jamieson delivered more bad news for shareholders who in the past six months have endured a record full year loss on a huge goodwill writedown and seen their company mired in a debt crisis. "There is considerable uncertainty that our budget will be achieved in the current financial year," he said, revealing generics were already $6.4m short of forecasts in the first four months of the fiscal year to Jan 31, 2011.

Jamieson said a sale process had begun for disposal of the Herron paracetamol brand, one of a number of non-core assets Sigma is putting on the block so it can pay creditors $100m by March 31 next year. Asked if Sigma would look at moving its manufacturing facilities offshore to better compete with cheap generic imports, Jamieson said the company was open to a joint venture but the issue wasn't currently on the board's agenda. SIP weakened 3 cents (4.76%) to $0.50.

Economic News

Merchandise Imports Up and Vehicle Sales Down

Merchandise imports rose 4% to $17.39bn in May from $16.80bn in April in seasonally adjusted terms, the Australian Bureau of Statistics said. The ABS said machinery and transport equipment accounted for the largest proportion of imports in original terms and were valued at $7bn.

New motor vehicle sales fell 3.2% to a seasonally adjusted 88,484 in May from April, the ABS said. Compared with year ago, new motor vehicle sales rose 16.4% in May.

Companies Holding Annual General Meeting (ASX 300):

Trust Company Limited

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COMPANY UPDATES FOR Tuesday 22 June 2010

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