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Live.

Good morning. Welcome to the

program. I'm Sue Lannin. In

business today- surprise

improvement. US consumers ready

to shop again. Benchmark

agreement - Japanese steel

makers win a big cut in iron

ore prices. And relief spending

- Hong Kong's latest measures to cushion the recession's

impact. Those stories coming up

shortly. First let's take a

quick look at the markets.

For more on the market

action I'm joined by Julia Lee

from Bell Direct. Good morning,

Julia. That surge in US

consumer confidence has really

lifted the mark isn't Good

morning, Sue. We saw some very

good consumer confidence

numbers coming out of the US of

course they were rising from a

record low in April of 40.8,

but it was the biggest rise in

six years. The rise in consumer

confidence led to a rise in

market confidence as well so a

stellar confidence from the US

market returning from a 3-day

holiday. We saw the Dow Jones

industrial average up by 2.4%,

the Nasdaq did better with a

strong performance from Apple,

the Nasdaq rose by 3.5%. The

social networking site Facebook

is now worth more than coffee

giant starback s? Starbucks

has been shutting down

storefronts because of the

global financial crisis and the

move away from preme arium

products. On the other hand

Facebook has been like a

speeding train. Facebook isn't

listed on an exchange yet but Russia's digital Sky

technologies has invested $200

million in stock and is

planning to invest another $1

00 billion. Good news coming

through there for Facebook. If

we tick a look at commodities

now, oil has hit a new 6-month

high overnight? This is really

a currency story as well as

equity story. The rise in

equities has been good news for

commodities and we've seen a

weakening in currency which has

been good news. Oil prices rose

by 3.3%. If I bring up a chart

for oil prices since the

see gains have been beginning of the year, you can

accelerating. It's

North Korea has fired more

short range missiles. What's

going to be the effect on

regional markets today? The

biggest effect here has really

been on South Korea with Ken

about stability around the

region so we have seen the

Cosby declining since the news

broke. It has affected markets

on Monday. We have seen the

Asia Pacific drop the most in

it week in terms of Monday's

performance. Today we saw the

Nikkei futures 225 up by 145

points, the hang seng futures

are losing ground by 165 points

but it is expected to be a

positive day around the

region. What localidate

suought on the region? Malaysia's GDP numbers for the

first quarter, we're expecting

a drop of 3.9%, Japan has trade

numbers out for the first

quarter. We expect to see

exports falling 4.2% in April

from a year ago and we expect

the overseas trade deficit to

be 55 billion yen. In Australia

we get the Westpac leading

index which would be an indOkz

of what to expect in

Australia's economy going

forward. Now let's take a look

at what happening in currencies

and commodities.

Rio Tinto, the word's

second-biggest iron ore

exporter, has agreed to a 33%

cut in contract prices with

Japanese steel makers. Still,

the price is the second highest

on record and much better than

expected by many in the market.

The outcome saw a strong rise

in iron ore stocks on the

Australian exchange as analysts

crunch the numbers on what this

benchmark deal will mean for

profits across the sector. With

the commodities boom well and

truly over, buyers now have a

much bigger say at the

negotiating table which is why

the first deal in the latest

round of iron ore contract was

always going to be crucial.

Typically what happens in these

iron ore price negotiationicise

the initial settlement is when

two parties typically flows on

to the other participants in

the market. Last year Rio

Tinto and BHP Billiton achieved

price rises of 96% for iron ore

produced in WA's Pilbara

region. The world's other big

announcement from Rio Tinto player from Brazil got 71%. The

that it's agreed a 33%

reduction on that price with

Japanese steel maker Nipercperc

on saw the market breathing a

sigh of relief. It's better

than had been expected and

still the second-highest price

on record. We've seen six or

seven years now of consistent price increases so this is

still a fantastic outcome when

you look at it from the iron

ore producer's perspective. Poo

iron ore is Australia's

second-biggest export behind

coal. Last year, just under 300

million tons were sold with a

value of $31 billion. Japan was

the second-biggest customer,

buying less than half the

volume of the biggest which was

China and now the Nippon deal

has been finalised, it's the

negotiations with the Chinese

which are focussing the

sector's minds. There's been a

lot of media speculation about

where prices may settle and

there's been a lot of comments

from China iron and steel

association requesting a return

to 2007 prices and 2005 prices

and 1905 prices, I don't know.

That is actually physically not

going to happen. A view shared

by analysts such as Morning

Star's Matthew Hodge who

believes China's desperate need

for high quality iron ore will

force it to fall into line with

the price negotiated with

Japan. Between BHP Billiton,

Rio Tinto and Brazil's valet,

they control 75% of the export

mark. Ithat are the lowest cost

producers in the world. China

has some low cost producers but

most of it is high cost. This

is a day after the National

Audit Office recommended ways

the tax office could lift its

dame in catching serious tax

avoiders. Research, analysis

and data files in the ATO's

serious noncompliance unit were

all found to be able to do with

improvement. At the moment

they're already putting volumes

into that spot market and said

said if they don't get the

number they want they'll

continue to push voluminise to

the spot markets. Also hoping

to benefit with Rio's deal with

Nippon will be Fortescue

Metals. Fortescue Metals is

one of the companies that had

bad news surrounding over

recent webs and months, any

good news as far as iron ore price negotiations are concerned is going to be

received well by the market.

The biggest winner bile the

Australian economy. Continuing

high prices of iron ore will

lesson the impact of the

recession. The Hong Kong

Government will boost its

stimulus spending as the

recession deepens across the

region. The Territory's

financial secretary says an

additional $2.2 billion will be

used to prop up the economy.

The spending will increase a

rise in one-off tax relief

measures along with waives on

public housing rentals for up

to two months and property

taxes for up to two additional

waters. The measures are partly

aimed at expand ing some of the

tax breaks in February's

Budget. The latest moves raise

the Government's stimulus

spending to 5.2% of the

Territory's GDP but economists

say it may not be enough to

pull Hong Kong out of

recession. Japan has moved to

pump more money into the

economy by offering some relief

to businessopers operating off

shore it's promised to provide

$3 billion from a Government

linked bank to small Japanese

firms operating overseas to

help them raise cash in US

dollars. While strains in

financial markets have been

easing in the past few months,

Japanese policy makers are

still worried about funding

pressures facing many

companies. The bank's corporate

survey last month showed

Japanese companies regard

funding conditions as the

tightest in a decade. There's

been another setback to general

motors' attempts to stave off

bankruptcy, failing to persuade

enough bondholders to sent a

debt for equity swap.

Bondholders have hesitated and

plan to give up debt in a 10%

stake in exchange for a

restructured company. GM needed

10% support to avoid bankruptcy

in odeadline on June 1. The

cost cutting agreement was

demanded by the Canadian

Government as it condition of

its join bail-out of the car

maker.

The Australian dollar has had

a record run against the

greenback over the past few

months. It's jumped around 20%

as the US dollar has weakened

and rose to around a 7-month

high overnight of 78.8 US

cents. So what's driving the

climb of the Aussie dollar and

is it sustainable ? To discuss

the highs and lows of the

currency I'm joined by Euan

McCreadie. Some traders are

saying the Aussie dollar is at

the vanguard of an economic

recovery, what do you think? I

think it is. I mean, there's a number of people out there at

the moment that do think the

Australian Dollar is a little

bit overcooked at the moment,

the rises being fairly rapid

over the last couple of webs

and some say it is due for a

correction, however there's not

a great deal of data both

locally and internationally

that's going to stop its halt.

It does look like it's got the

80 cent mark firmly in its

sight. What is underpinning

that? Isn't is really

speculators and Japanese house

wive s? I think it is. I think

the carry tray has been back in

vogue a little bit this week so that's pushed the Australian

Dollar up. Things are looking

very positive for the dollar

and especially high yielders

over the medium to longer term

for Australia. But is the rise

of the Aussie sustainable given

that is being driven by the

weakness in the greenback and

higher commodity price s? At

aus forx we expected the levels

to be 78 to 80 cent range to be

the level the Aussie would be

at towards the back of the

year. It's come very much as a

surprise to us so from a

sustainability point of view I

think it can. I do think that the Australian Dollar is open

to a lot of weakness, should a

lot of negative data out of the

states - sorry, lot of positive

data out of the States start sneaking through and if the

data out of Australia becomes

more negative it is susceptible

to a downward trend. What

about the impact of higher

interest rates both in Australia and New Zealand? Is

that really one of the key

reasons that is driving the

rise of both those currencies

against the greenback? I

definitely think so. Obviously with interest rates here in

Australia being relatively high

and can obviously in New

Zealand, it is attractive for

off shore investors to buy the

Aussie and push the high

yielders up. I think the

Australian Dollar will maintain

its bias of an upward momentum

over the course of the next

couple of days. Have you been

surprised by the weakness in

the yen carry trade? Not

really surprised. I mean,

obviously the comments from the

bank of Japan over the course

of the last couple of days have

been yen sort of positive. I

think we might see a bit more

interest in the Japanese yen

moving forward as positive data

and tank and reports and industrial reports sort of

suggest they are sort of moving

positive fairly quickly. And

we've spoken about the weakness

in the US dollar, how serious

are the worries about US

Government debt? We saw the

greenback near a 5-month low

last week against a basket of

currencies. It is a concern

for the greenback at the moment

th. Rumours spreading through

the market at the moment is if

the US will lose its AAA credit

rating, that is a bit of a

concern. Obviously if that does

occur you will obviously see a

flight out of the greenback and

into safer haven currencies

like your Swiss franc and

Japanese yen. It is a very

bebig concern that the ratio of

debt the Treasury and FMLC are

gaining in the States andby

impact or effects of that will

be felt worldwide. What's your

year-end forecast for the

greenback? I think it will be

a little bit on the back foot against the Euro and the pound.

I think the Euro possibly up

towards the - greenback-Euro up

towards the 140 to 160 range. I

know it's fairly broad.

Obviously the stirling, I think

that will hold up relatively

well against the greenback and

probably 140 to 160 sort of range. What about your

year-end forecast for the Australian Dollar? If interest

rates are maintained here in

Australia, above that 3% level

where we are now and the data

looks good locally, I think the

Australian Dollar could be

closer to the 85 cents mark not

before we see a correction some

time through the course of the year. While we're in the

region, what about the rimby?

Very interesting currency at

the moment. Australia is very

much driven by the events in

China. It's been one of our

closest trading partners. I

think the rimby will hold up

steady against the greenback

and we won't see much movement

against that. Finally woo,

ehave spoken about the yen,

what's your forecast for the

yen for the rest of the year?

Yen-greenback, probably I know

it's again another broad range, a bit too difficult to tell

you, I think the yen will

bounce between 90 and 100, obviously closer to the bottom end. Euan McCreadie, thank you

very much for joining 'Business

Today'. Thank you. Now as we

heard earlier, oil is sitting

on a 6-month high, buoyed by

the latest US consumer

confidence reading and comments

from the Saudi oil Minister but

analysts say there's an oversupply of crude at the

moment and the price spike

appears to be ignoring market

funmentals. Oil-producing

cartel OPEC has warned the

price may have to rise further

to encourage more exploration

and meet future needs. Just

when you thought it was safe to

go back to the bowser, the oil

price is making another

menacing rise. After peaking at

almost US$150 a barrel in mid

2008, the price of crude

tumbled to just above $30 by

year's end, however in the past

three months it's nearly

doubled from those lows,

maintaining a position above

$60 a barrel. ANZ's head of

commodities research Mark

Pervan says the recent rise has

been driven by improvement in

equity markets and the fall in

the US dollar rather than

supply and demand positions.

Were consuming less than last

year and although OPEC is

cutting supply, nonOPEC

producers are cranking it up.

Mark Pervan says the latest

statistic shows global oil

production outstrips

consumption by 1.5 million

barrel as day. The US oil

stockpile is at its highest

level in 19 years and the world

is in the biggest economic

slump since the Great

Depression. Still, the oil

price continues to hover around

a 6-month high. We could see

seasonal impacts in oil which could support prices and keep

them at these levels, I'm

thinking things like the US

driving season and hurricane

season. That begs the question

where could the oil price go

once the global economy

eventually recovers? We could

revisit those high levels

although the thing to note I

think this time round is there

is a bit of a buffer in much

higher supply at the moment and

we need to wash back that

capacity before we see high

prices again. The Australian

petroleum production and exploration association says

exploration activity has

stagnated around the world.

Some producers believe a price

above US$75 a barrel is needed

to encourage new activity ahead

of an OPEC meeting this year

Saudi Arabia is warning prices

could charge above the previous

record high within two or three

years unless more money is

invested in expanding

capacity. There will

inevitably be longer term

supply issues as a consequence

of the lack of exploration and

when we do see, as I say, when

we do see the recovery, when we

do see economic situation pick

up, we can expect that the oil

price will go higher than it

might otherwise have been. One

suggestion, to encourage oil

explosionation srk a so-called

flow-through share scheme. It

would allow investors to claim

a proportion of losses incurred

by the company they invest in

which the firm couldn't use

because they have no income to

offset against exploration

costs. Local producers are

disappointed the Government is

yet to honour its election

promise to introduce such a

measure to Australia. For the

small to medium sized players

it's very disappointing. They

make up a substantial part of

the industry in this country

and most importantly they make

opcore parts of the exploration

activity in this country

because frequently they're the

ones with the entrepreneurial

skill, they're the ones with

and appetite for risk and go to

places where the larger

multinational companies aren't

prepared to go. Belinda

Robinson warns that oil

exploration continually lags

demand so next upswing in

consumption could see a return

of the drastic undersupply that

plagued world markets until

just recently. Modern day scams

aren't just about sending money

to a mystery bank account in

Nigeria and the scammers are

more active than ever. That the

newworning from Australia's

consumer watchdog. In the first

few months of this year alone,

unsuspecting Australians handed

over almost $30 million to con

artists. Consumer scams are

nothing new. For just about any

transaction there's a variety

of ways to get ripped off but

it's the speed and efficiency

of scammers that has consumer

groups worried. The scam is a

constantly mutating virus. It's

always finding a way to get

into people's hearts or minds.

The Victorian bushfire disaster

provided a valuable opportunity

for con merchants to launch

fake appeals. The Beijing

Olympics was targeted with fake

tickets. Some of the scams we're now seeing are operating

in area that I think many

people would never suspect as

being territory for

scammers. The dog brings a lot

of joy to Australian families and of course scammers have

found a way to exploit this.

The ACCC has received over 150

complaints over the past two

years regarding pet scams. The

typical pet scam involves an ad

on the Internet, a family is moving away but can't take

their beloved animal. You send

the money but the pup Nev

arrive s. The competition

watchdog says 1 in 20

Australians fall victim to some

sort of consumer scam each

year, a cost to the community

of about $1 billion. It's ridiculous to think the people

who always go for this are

incredibly gullible or naive.

Some of them are not.

Sometimes we're finding

evidence suggesting people who

even have expertise in

investing are the ones who are falling for the investment scams. There's debate about whether the global financial

crisis is to blame for this

spike in scams but whatever the

reason, we're still falling for

them and the message to consumers remains the same - if

it sounds too good to be true

it probably is. Like many other

industries, publishing is doing it tough but one book producer

has come up with a way to

ensure people want to buy a

book - include them in the

production and customise each

copy. Now a new book on the

election of President Barack

Obama will have multiple

versions, each putting the

buyer into that historic

moment. On election night 2008,

this photographer noticed something interesting. Half

the people in the room picked

up their cell phone cameras and

took a picture of the

television set just as Obama

won. People not only wanted to

capture the moment, they sensed

they were witnessing history.

For the photographer that was

it kernel of an idea. I

thought wouldn't it be

interesting if you could do a

book that would weave together

the lives of every book buyer

with this incredible story of

Barack Obama's journey to the

wous? The Obama Time Capsule,

available tomorrow, is unlike

any coffee table book ever

produced. Hundreds of these pictures are never seen before

and they're alongside personal

touches. Add yourself and your

family to the pages of

history. Tailored to each

individual reader. It turns

out I'm in this book already in

a picture taken during the

primaries on Obama's campaign

plane but we can take a picture

of me holding that picture and

put it in the book all over

again. Your own photographs, a

dedication you write yourself,

half a dozen little surprises

scattered throughout the pages

to include you in the story,

printed one at a time,

by-passing the bookstore all

together. We think a book like

this that's printed only after

it's ordered and it's personalised for the end user

is the future of publishing.

You could have a cook book with

grandma's recipes in it?

Absolutely. But the book would

still be a book, not just a computer file, something to

keep on your shelf or your

coffee table, your own little

version of history. And now

let's take a look at what's

making headlines around the

region. The Standard reports a

slide in confidence in Hong

Kong hit the hang seng

yesterday, tracking declines on

the mainland with oil stocks

heavily sold off. The

'Financial Times' looks at the

first major Chinese off shore

purchase of a downstream energy

company after Petro China

agreed to pay $1 billion for

45% of Singapore petroleum

company. And the Wall Street

journal examines the move by

the US securities and exchange

commission to impose tough new

rules on share trading by

employees. And that's all for

today's show. If you'd like to

look back at our interviews, go

to our website at Wall Street

Australia Network.com/business

today. We'd love to hear from

you. I'm Sue Lannin. Thanks for

watching.

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