Oct 09

US deadlock sparks selloff on markets

The Australian sharemarket has slumped to its greatest daily loss in seven weeks, joining a sea of red in Asia as fears grow of a US government shutdown amid political deadlock.

The battle between US lawmakers over the budget prompted heavy selling in the region, with the ASX/S&P 200 Index closing 1.67 per cent lower to 5218.9 points.

The Nikkei 225 closed 2.06 per cent lower, South Korea’s Kospi ended trade 0.74 per cent down, while Hong Kong’s Hang Seng was 1.44 per cent weaker late on Monday. Shares in London opened 1 per cent lower.

A possible short-term shutdown was expected to have ”modest macro-economic effects”, with a two-day halt in government activities forecast to shave an annualised rate of 0.1 percentage points off US fourth-quarter growth, brokerage Goldman Sachs said on Monday.

The threat of a shutdown also foreshadowed future political tussles over the debt ceiling, which is seen as a greater risk for global financial markets than the budget battle.

The Australian dollar lost ground, falling to US92.81¢ on Monday morning as investors shied away from risky assets amid the uncertainty. The currency slipped again after weaker than expected Chinese manufacturing data renewed concerns of an economic slowdown. It was buying US93.06¢ late on Monday.

Australian 10-year government bond yields were also weighed down, falling to as low as 3.76 per cent on Monday morning after closing last week at 3.88 per cent.

Yields on three-year Commonwealth government securities followed suit, falling from a close of 2.76 per cent on Friday to 2.67 per cent early on Monday.

The local currency’s slide came ahead of the RBA’s monthly meeting on Tuesday, with some economists expecting the central bank’s board to be more vocal in its statement about the need for the dollar to weaken further as Australia rebalances away from mining-led growth.

The Australian dollar was trading around US90.03¢ during the Reserve Bank’s previous meeting on September 3, but edged higher before surging more than US1.5¢ after the Fed’s decision to delay tapering its bond-buying program.

The currency reached a three-month high of US95.24¢ on September 19.

While the renewed vigour in the dollar was seen as a point of frustration for the central bank, the RBA was widely forecast to keep the cash rate on hold at a 60-year low of 2.5 per cent as activity picked up in the housing sector.

”I think they will be quite happy to sit where they are for several months,” BT Financial chief economist Chris Caton said. ”Something has to happen dramatically – to the exchange rate or to the unemployment rate – to push them to another rate cut. On the other side of the coin, now they do have something of a worry about house prices. Housing is not in a bubble in Australia, but 15 or 20 per cent from now, it could be.”

Credit growth in the private sector remained subdued, rising by 0.3 per cent in August despite expectations a busy property market would fuel increased borrowing, RBA figures released on Monday showed.

Housing credit grew modestly at 0.4 per cent, the same level of monthly growth since January. It took the increase over the past 12 months to 4.7 per cent – the strongest lift since last September.

TD Securities-Melbourne Institute’s monthly inflation gauge, also released on Monday, saw the headline reading rise 0.2 per cent in September to reach a yearly gain of 2.1 per cent, near the bottom of the Reserve’s 2 to 3 per cent target.

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Oct 09

OZ douses talk of Glencore move

OZ Minerals has poured cold water on rumours that Glencore Xstrata is preparing a takeover bid, declaring it has received no contact from the Swiss giant.

London media speculated over the weekend that Glencore had built a ”secret” 10 per cent stake in OZ – which mines for copper and gold in South Australia – and was preparing to launch a full takeover soon.

The speculation sparked strong interest in OZ shares, which rose 6.7 per cent in early trading on Monday, but eased after OZ distanced itself from Glencore.

”The company advises it has not received a substantial shareholder notice from Glencore nor has OZ Minerals been approached by Glencore in regard to any proposal,” said OZ in a statement.

Under ASX rules, shareholders must file a ”substantial shareholder” notice as soon as they own 5 per cent or more of a company.

Local pundits were sceptical about the likelihood of a takeover, with most suggesting such a move would be at odds with Glencore’s recently stated business strategy.

Glencore has recently opted to leave most of its undeveloped assets as they are, and focus instead on developing existing operations and bolt-on acquisitions.

Much of OZ’s value relates to the undeveloped Carrapateena deposit in South Australia, with its one operating mine – the nearby Prominent Hill – being closer to the end of its life than the start, and suffering from rising costs.

Wilson HTM analyst Cameron Judd said he did not expect Glencore to mount a full takeover for OZ. ”Never say never, but I don’t think it’s likely,” he said.

Mr Judd said the outlook for copper markets was generally strong and South Australia was a good place to mine, but buying OZ Minerals would be at odds with the cost reduction process, including the sale of copper assets, that Glencore has under way.

”Glencore, or another entity with balance sheet strength, is more likely to emerge as a potential joint-venture partner at Carrapateena, and that would be a scenario I think OZ Minerals would be happy with too.”

Carrapateena is considered highly prospective, but development is several years and many millions of dollars away.

OZ shares closed just 2¢ higher at $4.43.

OZ has in recent years been seen as a likely acquirer of assets, given it has long boasted a cash pile of almost $1 billion. But that cash pile has gradually been eroded by the Carrapateena purchase and dividend payments, to the point where it stood at just $432.9 million in the August results.

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Oct 09

Credibility in reserve

The cheer squad a-wishin’ and a-hopin’ for another Reserve Bank interest rate cut is nothing if not persistent, even if they’re reduced to advising the RBA to pretend to want to trim rates again. Too bad the squad is ignoring pretty much all the available evidence pointing to the central bank leaving monetary policy right where it is.

Even the cheer squad doesn’t expect the RBA board to move rates at its meeting on Tuesday, which is why the doves are just pleading for the bank to reinstate an explicit easing bias instead. There would be a little problem with that though: it would destroy the RBA’s credibility.

It’s a simple matter to read the minutes of the September meeting and then ask: what has changed since September 3 and has that change made looser monetary policy more or less likely?

When the minutes of Tuesday’s meeting are released, they’re likely to record that the economies of our key trading partners have mostly continued to improve. Especially, all the scaremongering about a hard landing in China has receded as a wonderful growth rate of about 7.5 per cent is confirmed.

The ripple of headlines about capital flight from some emerging markets has faded, helped somewhat by the US Federal

Reserve’s dithering over tapering. Europe’s mess is no worse and is in some ways a little better, Italian politics notwithstanding.

The threat of financial market instability induced by a possible shutdown of the US government is there, but that doesn’t scare us as much as it used to. Having been to the brink before, the view over the edge isn’t quite as scary. Besides, the threat is not without some benefit to us while it’s credited with weakening the Aussie a touch.

So the international picture does not provide an argument for an easing bias, let alone an actual cut.

Domestically, the news also has been mostly positive while the negative bits were already factored in. The big transitional bet on domestic housing continues to head in the right direction as lower interest rates do their stuff – firming prices and thus encouraging more building, albeit not enough.

And, as the RBA continues to remind us, it’s still early days for the full impact of the past couple of cuts to work their way through the system. Besides, the RBA would look a little silly cutting rates again to stimulate housing further when it’s also firing warning shots about lenders and borrowers being in danger of getting carried away.

Yes, the labour market has remained soft, but that is as expected. Indeed, the RBA credits a continuing weak labour market over the rest of this financial year with keeping inflation down even as the Aussie weakens. No surprise or change of outlook there then.

Retail sales also have been soft and Wednesday’s ABS count of August sales won’t be good, but industry liaison is likely to tell the board there has been an election-related pick-up this month. The business and consumer confidence lift in anticipation of a change of government has carried through after the event.

More importantly for the bigger policy picture, the Tweedledees of the new government are maintaining the same sort of stimulatory fiscal policy as the previous Tweedledums, so the risk of a negative shock there has receded.

Our banks are officially strong and have money to lend if people and businesses want to borrow more, which the confidence thing and the housing pick-up should in time encourage them to do.

So, all that lot points to rates remaining steady and for quite some time. The only negative over the past four weeks has been the Australian dollar’s rise on the Federal Reserve delaying the start of tapering – but that’s about them, not about us, and it is only a delay.

Thus Tuesday’s should be one of the easier board meetings, with the main interest for members being just what seeds have been sown for a rate rise some time next year.

It is entirely reasonable for the RBA to fire warning shots when it spots problems developing – and it’s wise to take heed of those warnings. Yet the extrapolation of those warnings and some price rises into talk of a housing bubble has been inflated, so to speak. Inner Sydney and Perth are not the entire Australian housing market, and even in those two hot spots, all may not be quite what it seems.

Michael Pascoe is a BusinessDay contributing editor.

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Oct 09

Racing club’s election tussle

The Melbourne Racing Club could be ”compromised” as it considers a $1 billion property project during the crucial spring racing season because of a stoush over its executive committee, a court has heard.

MRC member Alistair Ewart has asked the Victorian Supreme Court to force the club to hold fresh elections for the committee after he was disqualified last month for the dastardly crime of electioneering. Apparently running any kind of campaign is forbidden – perhaps it frightens the horses.

Club CEO Brodie Arnhold has told the court that, with the Caulfield Cup carnival in full swing, the MRC is ”currently in the busiest time of the year”.

”The administration and operation of the MRC and its ordinary activities will be compromised by the absence of three committee members for the period it would take to hold a further ballot,” Arnhold said in an affidavit. With the potential purchase of a $15 million pokies venue and $10 million of grandstand renovations at Caulfield Racecourse on the committee’s agenda, Arnhold said that ”the present point in the calendar is the time at which the absence of three committee members will result in maximum detriment to the club’s operational functionality”. And there’s the $1 billion redevelopment of former car parks around the racecourse into ”a low-medium density residential zone, a mixed-use retail precinct and an area set for use for commercial and residential accommodation” to mull over.

This is Ewart’s third stab at a spot in the committee rooms. He fell short in 2011 and was disqualified last year, also for electioneering. There is also a history of conflict between Ewart and the club, with Ewart’s trophy business, Winning Edge, winning what he told the court were ”substantial damages” in a 2009 breach of contract case. Ewart denies breaching the rules and says the MRC didn’t follow its own disciplinary rules when cancelling his nomination.

Members were not told Ewart had been rubbed out and the election went ahead with him on the ballot paper. Arnhold told the court Ewart finished last with 1262 votes and incumbents Patricia Faulkner (1436 votes), Rod Fenwick (1555 votes) and Roger Donazzan (1411 votes) were re-elected. As the club has 11,000 members, that means thousands didn’t fill in the ballot paper. Ewart didn’t succeed in stopping the committee being confirmed at the AGM and the matter remains before the courts.Kohler pulls pin

Veteran finance commentator Alan Kohler has pulled the plug on his long-running ABC TV show Inside Business in order to ”have more of a sensible working life”.

Kohler has been juggling many hats – in addition to the Sunday morning show he appears nightly on ABC TV news presenting the finance report and writes four columns a week for websites Business Spectator and Eureka Report. After 12 years of filming Inside Business on Friday, the same day he writes a mammoth missive to Eureka Report subscribers, something had to give.

He said the move had nothing to do with conflict-of-interest criticisms. Kohler has been a News employee since selling his share in Speccy and Eureka publisher AIBM to the Murdoch empire last year. The last show airs on December 1.MONA tie-up flies

Flying roo Qantas has signed a sponsorship deal with Tasmania’s Museum of Old and New Art, prompting the usual round of mutual admiration – this time featuring gambler and MONA God (that’s what it says on his parking space) David Walsh and Qantas flack Olivia Wirth.

”We are extremely proud as Australia’s national carrier to partner with MONA and drive visitors from both Australia and overseas to experience this fantastic museum,” Wirth burbled in a press release. Drive? Shouldn’t an airline be flying them?

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Oct 09

Campese wins prestigious award

OneCommAwards 13093013.jpg Photo: [email protected]苏州美甲美睫培训.a Terry Campese with the Ken Stephen Medal. Photo: nrlphotos苏州美甲美睫培训

Canberra Raiders skipper Terry Campese could have been excused for wallowing in self-pity after injury wiped out two years of his career.

Instead, he deservedly won the Ken Stephen Medal at the NRL’s One Community awards on Monday after launching his own charity to help people worse off than him.

When knee problems ruined his 2011 and 2012 seasons he set up the Terry Campese Foundation, which this year has raised about $100,000 for local causes.

After a time in his career he would prefer to forget, Campese, 29, is aware how fortunate he is.

After a Raiders season littered with mass sackings and off-field turmoil, Campese’s work is one of the many feel-good stories gone unnoticed.

”That’s what my passion is, trying to help people in need,” Campese said in a video placed on the club’s website after his nomination earlier this year.

”We’ve helped a few people along the way, it’s definitely one of those things which puts a smile on your face, and puts life in perspective as well in how lucky we are.”

Campese used some of the initial funds raised to help fund a wheelchair for Queanbeyan seven-year-old Bailey Whitton, who was born with cerebral palsy, epilepsy and Tourette syndrome.

He invited Bailey’s family to a Raiders game, something his mother Tracy said the family would always remember.

”I was blown away Terry introduced Bailey to his family, it meant a lot to me he included Bailey and thought of him as normal,” she said.

”He’s teaching his kids that others with disabilities are normal, they’re to be included.”

Campese received $5000 for himself and the same amount for a charity of his choice for winning the game’s biggest honour for community work.

He edged out St George Illawarra captain Ben Creagh and Newcastle skipper Kurt Gidley. Fifteen players had been nominated for the award.

Campese is an ambassador for children’s charities Ronald McDonald House, CanTeen and Raising Hope.

Like many of his Raiders teammates he is also heavily involved with Menslink’s ”Silence Is Deadly” campaign, which targets teenage male depression.

”I’m very honoured to have won the Ken Stephen Medal and represent the huge number of players who spend time in the community helping those less fortunate than us,” Campese said.

”I didn’t set up my foundation for the accolades. The recognition I love is seeing people’s face when you know you’ve made a difference.”

It is the second successive year Campese has been nominated. North Queensland captain Johnathan Thurston won the medal last season.

Terry Campese Foundation director Pamela Slocum admitted on Campese’s video she ”had a few hesitations” when Campese first approached her about setting up a charity.

She now knows she needn’t have worried.

”It’s hard to run these events every year and I thought I hope he’s really into it and not just putting his name to it, because often that is the case,” she said.

”He’s smart enough to know the name Terry Campese does help a lot, but that’s not the reason he does it.”

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