Could a string of broker downgrades mark a top for the market, at least for the near term?
This is one of the questions investors will be pondering today as they take in another rise in the oil price and a fall in iron ore.
The futures market is expecting a flat day for the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) as US equities eased into the red overnight.
I believe our market will be marking time under the psychologically important 6,000 level for the next few months, so investors should get comfortable although today won't be a boring day on the market.
The West Texas Intermediate (WTI) crude oil benchmark rallied for the sixth day with a 0.6% rise to $US56.71 a barrel but iron ore fell below $US50 a tonne. The iron ore price index from the Metal Bulletin dropped to $US49.78 a tonne from $US50.33 per tonne.
That won't help sentiment towards BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), although it will be miners like mineral sands producer Iluka Resources Limited (ASX: ILU) and Whitehaven Coal Limited (ASX: WHC) that are likely to be under more pressure as brokers downgraded the stocks.
Iluka has been cut to "underweight" from "neutral" by the Commonwealth Bank of Australia (ASX: CBA) while Whitehaven has been reduced to "hold" from "add" by Morgans.
The coal miner is also expected to release its quarterly production report today.
But these aren't the only stocks to have lost favour with brokers. Freight company Aurizon Holdings Ltd (ASX: AZJ) got lowered to "sector perform" from "outperform" by RBC Capital as Credit Suisse unceremoniously downgraded Echo Entertainment Group Ltd (ASX: EGP) by two notches to "underperform" versus "outperform".
The downgrade gloom could be offset by corporate action news. Primary Health Care Limited (ASX: PRY) has hired UBS to be its strategic advisor, reported the Australian Financial Review.
The news will help fuel the merger & acquisition fever that is gripping the market as Primary Health has been flagged as a potential takeover target by private equity firms.
Elsewhere, The Australian reports that the chairman of salmon farmer Tassal Group Limited (ASX: TGR) is locked in talks with De Costi Seafoods, while the Australian Financial Review said that Oaktree Capital has sold 72.3 million shares in Nine Entertainment Co Holdings Ltd (ASX: NEC) for $2.215 a pop.
Oaktree's sale represents around 7.7% of the company and is priced at a 0.7% discount to the last traded price, according to Bloomberg.
Shares in Nine Entertainment surged yesterday after it agreed to sell its Nine Live business.
In the energy sector, Santos Ltd (ASX: STO) will be in the spotlight as it releases its March quarter production report.
Told you it won't be a boring day.
