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Good morning. Welcome Network. I'm Whitney Fitzsimmons. Coming up - fear factor, bad news and factor,

losses across factor, bad news and huge investors seek safety.

cleaning up its act, China

looks to a carbon trading

market. Those stories coming up

shortly but first let's take a quick look at turmoil and volatility in

overseas trade.

Overnight investors had that sinking feeling yet markets fell across the globe.

The FTSE dropped around 4.5%,

the Dow fell nearly 4% the Dow fell nearly 4% while the NASDAQ plungeled by more

than 5%. The latest volatility

has been sparked by even more

concerns that the European debt

crisis will spread to the

American banking sector.

Another day, another tumble on

world markets. This time

triggered by a Bevy of reports

including one that including one that regulators

were putting US units of big European scrutiny. Out of Europe European lenders under

scrutiny. Out of Europe really

set the tone for the day,

especially that Dax. We look at the German stock market than we look at any other stock

market out of the US, more than China, more than Japan. European equities suffered their biggest daily

fall in 2.5 years and US stock

markets tumbled more than 4%.

Bank shares were hardest hit

with some stocks falling more

than 10%. The markets just reacting to

the truth is it's coming in the context of ongoing context of ongoing worries

The aftermath of about the European debt crisis.

argument in the US about the

debt ceiling, I think it's just

right now there's not been much

news that has suggested that this soft patch is over. There

was some calm before this latest storm as the roller

coaster ride of bank stocks

plummeted downwards. Last week

Wall Street suffered one of most volatile rides in history

but stocks have been relatively

stable since before the latest

free fall. Franco German did little to sway investors. free fall. Franco German talks

Reports that Germany is also

under threat is spooking investors. It's that German

market which is really the

leaders in Europe, our biggest

traiteding partner by the way

and they were down triple

dinltss - digits dinltss - digits this morning

so we knew coming in we were going to have a rough opening. A disappointing day again

because we still have a very negative environment

considering uncertainty in

America. We see very clear America. We see very clear that the political uncertainty has affected the real economy. The

latest Greek bailout plan

also raising doubts. A deal

from Finland to get collateral

loans to the debt-ridden to Greece to secure its rescue

country is sparking renewed

concerns. Several other nations are

are jumping on the band wagon,

putting in similar requests for

financial aid. It's threatening

to undermine the Europe-wide bail out for

to have mainly a political

impact. Finland's contribution

is pretty much cancelled out as

a result of this deal and a result of this deal and what

you have is that message being

sent to countries that if you

have euro sceptic vote you have euro sceptic vote you

actually are being rewarded it. There's no respite across

the hemisphere. In Asia Japan's

exports fell for the 5th

straight month. And the toxic

cocktail of negative news has sent goal soring to fresh

records to over $1,286 an ounce

as investors bought into as investors bought into the

safe haven precious metals.

Analysts say the nervousness Analysts say the nervousness in

the equity markets are pushing

people towards gold. There's predictions if

predictions if it continues to

climb at this rate it may hit $2,000 by the but oil slid by nearly 6% on concerns about dwindling future

demand in the US for energy.

New York's main contract, West

Texas Intermediate Crude lost

$5.20 to around $82 a barrel.

There are concerns it will fall

further to around the $75 to $80 a barrel level in coming

Weeks - weerks and for more on the market action I'm joined by

Michael McCarthy - rather Christine It's been another wild ride on

global markets can you give us

the details in the US session? It was a fear-driven

sell off last night. Fear of recession leading to

digit losses on Wall Street. recession leading to triple

Now first disappointing economic Now first we did see

disappointing economic data,

CPI higher than expected, then

there was a jump in jobless

claims up to 408,000 for last week. Out then came manufacturing index from the

Philadelphia region.

month's read was at 3.2 we were

expecting a fall to 2 so still

a number above zero. Any above zero a number above zero. Any number

above zero indicates expansion

while a number below zero signal ascontraction. The

markets did a double take quhen

the numbers came out. the numbers came out. Minus 30.7. It was the lowest since March 2009. There were also

pressures coming from you're.

Problems in the European

banking sector was weighing on

Wall Street and we saw another

massive sell off in the US with

the Dow down about

points. Lepts move to Europe.

Those concerns about the US

economy filtered through to

the details? US concerns saw major indcy there's, what are

European investors fleeing

equities last night. A focus

was a report from the Morgan

Stanley issuing a warning that

the US and euro zone were dangerously close to They also cut the euro growth dangerously close to recession.

forecast for the next 2 years and also in focus was and also in focus was that

banking sector. We heard US biggest lenders under the spotlight. Funding worries did

and see the banking stocks dumped

and we saw Dexion fall more

than 12%. Investor were

targeting German stocks as a

short selling ban was imposed

in other parts of Europe. Among

the worst performers in Europe

were the sectors that relied on were the sectors that relied

global growth. We saw miners,

banks and the auto sector tumbling

tumbling last night. And what's

likely to happen in our region today? Well, big losses are expected across the region

following those very negative

overseas leads. Early in the

week we did see the calm week we did see the calm come

back into the market but as evidenced by events last night

that was just the calm before

the storm and today extreme

volatility is back. Across in

Japan further losses expected,

the yen is still at record

highs and yesterday we did see

a report showing that Japanese

exports have fallen in July. On our local market today steep

falls are expected. We're

expecting even though gold

miners to come under pressure

today with the SPY down around 103 points. What economic data

should we look out for

today? No doubt investors are

still reeling from that poor

economic data out last night

from the US. But today in China

we'll see the flash business

sentiment survey. Across in New

Zealand we've gt a credit card

spending data out and in Japan

we'll have the industry

activity index

expecting a small increase to

2.2% from 2% the previous

month. Now tonight the big no kus is from the euro zone. kus is from the euro zone. The Germany producer prices and

borrowing data that's the big

one to watch out for

today. Thanks for the update.

That's Christine Ip from Bell

Direct there. Let's take a closer look at what's happening

with currency s and

To look more closely at how currency markets reacting to

the turmoil on global markets the turmoil on global markets I

spoke earlier to John senior currency strategist from

Thomson Reuters. Welcome to the

program. Good morning program. Good morning , Whitney. This latest bout of

volatility, many analysts have

said that we should for the time being, so you'd think that investors would really be used to it by now, wouldn't they? Well, it wouldn't they? Well, it was pretty much expected. The pattern very often happens if

you look back going back 50

years is that when the markets

really royal up there's a

period followed of calm period followed of calm and

bargain hunting and

royal up again. I think the volatility we're seeing is expected to happen for some

time. There are major issues

out there that haven't been

resolved yet. Until they are resolved yet. Until they are - resolved the markets will

continue to royal. What sparked

sth latest volatility, you said there are major issues out

there. Just outline what they

are in your view? The headlines

are all about the global growth story, the ution economy could be slowing down, the economists are now saying between 30% and

40% of a recession, there's fears that will slow down and a few major banks last night lowered their

forecast for China. The biggest

concern out there is the fact

that major banks in Europe are having trouble to the funding markets, to the funding markets, their

cost of funds are going cost of funds are going higher. It's price action not too

dissimilar than what happened before the Lehmann crisis. So

that is the biggest source of

concern and of course this week

when the Franco German summit was supposed to address some of those concerns really nothing

came out of that and that is just added to investor angst. Why is angst. Why is that, because if

we're seeing signs of what was

happening before the happening before the Lehmann's collapse, you would think that

officials and policy makers would be able to read

signs and then take quick action? Well the ECB, you know,

the ECB and the Federal Reserve

of New York are doing a lot.

They've got a lot of those emergency funding measures in place that they had since place that they had since the

GFC and it was a 'Wall Street Journal' report yesterday

saying the New York Fed is actually looking

banks domiciled in the US

because they're fearful

contagion in the European - in the US bank to bank the US bank to bank lending markets. So they

it, the problem is that it's really on the back of the

policy makers in Europe and the

politicians to do something to

create some sort of create some sort of safety net for the banking system of Europe and they're very

reticent to do that. Until they

do we're going to go through these periods of volatility. Are they

brinkmanship and they're

playing politics and Germany is

feeling why should they carry

the weight of the EU That's part of it but there's this

baichck problem we've had from

the begin wrg the politicians

look at it purely as a

liquidity issue whereas

investors look at it as a solvency issue and that is the

basic problem and so the politicians do plenty about

providing liquidity, getting

the ECB to provide the ECB to provide liquidity

but that's just but that's just creating a

bridge but it's a bridge to

nowhere until they figure how to fix those solvency problems and but the other

point is definitely right.

Germany does not want to put up

the money. They're the ones who

have got the money, they don't want to put want to put it up to provide

this backstop because A, it's going to be costly to the German economy, it puts their

fiscal situation at a bit of risk. And domestically it's bad for Angela Merkel? Absolutely because I think the German people feel if you put this money up as a backstop the money up as a backstop the rest of Europe will get lazy again. Of course this volatility has quashed risk

appetite and in response to

that the Australian dollar that the Australian dollar thaz

fallen back slightly. It's sitting at sitting at $1.03, I

believe. Yes, still above that

last week's low when things

were really royaled up, we're

at risk of going down again. If these markets continue to fall

apart you will see the Aussie

dollar fall. The dollar fall. The Australian

dollar is very much

dollar is very much a global growth currency the Asian growth story is strong the Australian dollar

stays relatively strong but if

the situation in the US and

Europe means that their economies could go into recession that will recession that will definitely impact Asian growth and that

will send the Aussie dollar

further down. So it is quite possible that we could go below parity because I was under the

impression we would see this

level for some time? Yes, but that would all be dependent on

the fact that there will not the fact that there will not be the world and that is the big fear now that one of fear now that one of the

European banks could go towards

the wall and based on the fact

that the Asian growth story

remains strong enough to remains strong enough to keep

the global growth story on par.

However, if that doesn't happen, the Australian dollar becomes very becomes very vulnerable because as we saw in 2008 when investor risk appetite just completely disappeared disappeared the Australian

dollar fell 40%. I don't see

that happening this time but it certainly will fall below

parity if the situation remains

uncertain. Now the corollary to uncertain. Now the corollary to this is US long-term Treasuries have risen. What does that say about investor confidence

the US economy? It's not so

much an endorsement of the US economy or an endorsement of

the US. The US Treasury market

happens to be the largest, the

most liquid market in the most liquid market in the world and when everybody gets very

nervous about taking risk and

they don't want to

they don't want to buy commodities and they don't want

to buy equities, one of the

things they buy is Treasuries.

Of course they buy gold as

well. And we've seen that overnight overnight jump as well? Massively so but the

other safe haven destination,

if you like, is US Treasuries. We also saw We also saw big moves into US

guilds because of the AAA

rating and the liquidity of

that market and German buds.

It's no so much an endorsement

of what happened in the US,

it's finding a home big enough to park all the nervous

funds. You mentioned gold, I

know currencies are your gold there are some that are

predicting it could rise to

$2,000 an ounce. What's your

view on this? Well actually

gold is in a sense

because one of the reasons gold

is going up is lack of faith in currencies. You have the typical safe haven currencies,

for instance are the Swiss

franc and Japanese yen. The Japanese bank and Swiss

national bank are desperate

trying to deter investor from putting their putting their money into those currencies through

intervention. So the intervention. So the attraction

of gold is fantastic. There's

no central bank, you know,

trying to stem the gold rise.

The gold will rise on natural

forces. Number one, number 2, because interest rates are because interest rates are so

low around the world one of the deterrents of buying gold is

you didn't get any return for

your money. You're not getting

any return for your money in any of the any of the currencies anymore because interest rates so are

so low and you've got a situation where in the US dollar or other currencies are starting to buy

gold. I think gold can go

gold. I think gold can go

higher. I'm not a gold bug but

I think for gold to go above $2,000 it could happen very

easily and that will be particularly true if the

markets continue to royal up as

they have. We'll have to leave

it there, thanks for your time

today. Thank you, Whitney.

Well as markets plunge the US

and China have been talking up

nations. At the start of a

9-day tour of Asia the US

vice-president Joe Biden has been given a warm reception in Beijing. Mr importance of personal ties and said it was vital both

countries worked together in countries worked together in a climate of

uncertainty. Beijing has a huge

invested interest in the US economy holding $1.2 trillion

in US treshy debt. in US treshy debt. China's

State media has criticised

Washington's economic

Biden's visit. Wes farmer has withstood early year floods withstood early year floods and earthquakes as well as the earthquakes as well as the high Australian dollar to lift

full-year earnings by 23% just under $2 just under $2 billion. The

Coles Group again contributed

strongly but insurance earnings

were badly affect bd I the natural disasters. The company remains upbeat though about the future. Economic uncertainty

and a number of natural disasters have buffeted

Wesfarmers' many operations

this year to have weathered the

storm. The results show, I

think, the benefit of

diversity, the portfolio businesses we've got is strong. Most of the businesses

are performing well and quite

frankly I think I prefer to

have a diversified business in this environment than be fully

loaded into one or two divisions that might have gone backwards. Wesfarmers posted a

full-year net profit of $1.9

billion, up 23% on last year.

Revenue was up 6% to around $55 billion. The company's biggest

earner is the Coles supermarket

chain. It's managed to increase earnings by 20% despite a tough

retail environment but retail

analyst Jason Darling says it's

still under performing. Supermarkets tend to

to have reasonably to have reasonably defensive

earnings. Part is also because they have a new management team and a new strategy which is

trying to invigorate the

customer and get the customer back to Coles but also part back to Coles but also part is really because Coles is just

clawing back some of the under performance last 5 to 10 years. One of its

tactics has attract ed a lot of heat. Coles started the $1 a

litre milk price war prompting concerns dairy farmers will lose doing some genuine work with

dairy farmers to ensure that we continue to have long

partnerships with dairy

supplying us into the future. The Bunnings future. The Bunnings and

OfficeWorks stores continue to do well. Bunnings is a consistent performer and it's a

category killer. It's preparing itself really Masters which is the Woolworths

hard ware brand so it's been

lowering prices, making sure

its offering is right and a lot of people of people don't consider

hardware to be a hardware to be a discretionary spend. In the value spend. In the value retail sector a resurgent Kmart appears to be eroding appears to be eroding Target's customer base but customer base but analysts blame other

difficult result out of difficult result out of Target this year comes down to the

difficult retail conditions and I think

I think it's very difficult to

plan your sales in volatile times. We're seeing

consumers trade down in where they shop

they shop so we're seeing

people move from buying at David Jones to Myer, David Jones to Myer, down to

Target and into Big W and Kmart and that reflects the frugality

of consumers at the moment, particularly in the June quarter. The insurance sector

was hit hard by the floods, Cyclone Yasi and the

Christchurch earthquakes with earnings down 84% to $20 million. million. Meanwhile the natural disasters cost the retail

division $100 million, only 60%

of which was covered by

insurance. Its coal division

too too was badly affected and Wesfarmers predicts a loss in

earnings of between $200

million and $300 million. But

the losses don't seem much when

compared to Wesfarmers'

spending plans for this year.

The company will increase its capital expenditure program capital expenditure program by around 40% to $3 billion. Well investors may have lost

billions of dollars from

volatility on the share market

but the market operator itself, Exchange, is reaping the

reward. Full-year earnings rose

7%, $352 million beating expectations. Still the ASX

faces challenges ahead including new competition.

Natural disasters, stalling

economies and the world's debt confidence, but not the ASX

bottom line. Looking at the

year in review there's a strong

financial operational and compliance performance across

the group during a period of

very mixed economic indicators domestically. After tax domestically. After tax profit for the year increased 7% to just over $350 just over $350 million. Operating revenue rose to a

record. Investors got a final

dividend of 93 cents a share fully franked. What made the

difference and drove revenue 5%

higher and 7% higher were

growth in

streams that count. Listings

revenue and drifives rev

you. Robert Elliston says

market volatility is here to

stay for a while. I suspect

it's got at least somewhere

between 1 to 3 years of life.

Volatility as I think Murray has said publicly and

others, is probably going to be

the new norm. The ASX has some

challenges ahead. A market operator chooi ChiX has been operate granted an

operating licence by the

Government. The ASX has agreed

to a 5-year deal to allow X Chi X to operate ready for when it may become a

reality. The planned tie up

between the ASX and the

Singapore exchange was blocked by Canberra. Robert el strom

was clear. We talk all the time

to our counterparts around the

world on a wide range of

subjects. The question is if we

are currently in dialogue as a

view to making an announcement, most definitely

most definitely not. ASX shares

ended down to $29.40 even though with forecasts. Fosters has

returned fire in the face of a now hostile takeovered by Foster boards is Foster boards is recommending shareholders reject the offer restating its belief that it

undervalues the company. Foster

shares closed 1% higher at $5 indicating SAB Miller might

have to pay more to get the

deal across the line. Meanwhile

Japanese brewer Asahi will

slash out and slash out and pay $1.3 million for New Zealand beverage

company Independent Liquor

Limited. It's the brewer's

biggest purchase as it expands

overseas to counter sagging

sales in Japan. A shrinking

population is hitting the sales of beers and soft drinks and

the deal gives Asahi control of

the 4th largest maker of

bottled cocktails. AMP stocks

have surged despite an 18% fall in first-half earnings. Underlying

Underlying earnings were up 19% when the the takeover of AXA the takeover of AXA are stripped out, stripped out, something

investors warmed to with AMP investors warmed to with AMP

shares adding 2% while other

financials fell. Some of the growth strategies

to pay off with AMP financial

planning up 8% over the 12

months to - June and the new superannuation platform superannuation platform with

assets under management of $2.8

billion. China's growth over

the past 3 decades has come at

a cost to its environment. The country is country is now desperate to

contain the damage asnational carbon emissions trading

trading market will help it

reach its goals of cutting energy use and pollution. Faced with severe increasing urbanisation China

knows buying and burning more

fossil fuels is not the way

forward and it hopes a nation

wide carbon trading market can

help it meet its energy reduction goals. Researcher was

advocating for such a scheme several years ago.

TRANSLATION: At that point in time many people didn't really lot of misunderstanding. lot of misunderstanding. Some people even thought that a

carbon trading scheme was a trap set up by developed

countries. China's carbon trading scheme will first be

tested in 5 provinces before being introduced around the country. The reports country. The reports are targeted for the national

platform the 2015 but under the

pilot program pilot program the Government

will introduce new policies apply what's officially been described as punitive electricity tariffs to intensive industries. A carbon

market would help China reduce

its carbon intensity by 40 to

45% compared to 2005 45% compared to 2005 levels

within 10 years. But within 10 years. But like other developing countries, China isn't bound by isn't bound by the Kyoto protocol to reduce greenhouse

gas emissions so can measuring

carbon intensity form the basis

of a carbon trading market? We

can try it and gradually build up. Eventually of course up. Eventually of course we have to use an index to trade. China is

still a long way from its goal.

Laws need to be drafted and Laws need to be drafted and a

reliable emissions data has to be collected but a carbon

trading market might just help China meet its China meet its vision for a cleaner, more sustainable

future. And now let's take a

look at what's - making

headlines around the region. The 'Financial Times' reports Hong Kong exchanges and

clearing plans to form a joint venture

venture with its Shanghai and Shenzhen counterparts Shenzhen counterparts that would mark a significant link

between the exchanges. The unemployment has fallen to its lowest level in 4 months but

the global stock market turmoil

is expected to cause it to rise

again in coming months. And the 'Wall Street

Coca-Cola has a plan to spend

$4 billion in China over the

next 3 years. That's all this edition of business this edition of business today.

I'm Whitney Fitzsimmons. Thanks for joining me, enjoy your day. Closed Captions by CSI

This Program is Captioned

Live. This morning - tributes pour in for the ABC's Paul Lockyer, Gary Ticehurst and

John Bean feared dead in John Bean feared dead in a

helicopter crash. We know that

bodies have been found and we

fear it's going to be a very

sad day with the loss of these

3 outstanding colleagues.

Also today - Also today - Australian stocks set to markets down after another rough night of trading. Israel

launches air raids on Gaza

after 7 Israelis were killed after 7 Israelis were killed in militant attacks. And AFL coach Alastair Clarkson on the brink of a new 3-year deal with