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(generated from captions) This Program is Captioned Live. Good morning, Network, I'm Brigid Glanville. Coming up on the program manufacturing data shows signs of a slowdown in global growth. Short option, why major hedge funds are companies. And spending

quandary, the diverse trends throwing up big challenges throwing up big challenges for retailers. Those stories coming

take up shortly but first, let's

take a quick look at take a quick look at the

markets. In Japan the Nikkei

first time in closed above 9,000 for the

For more on the markets I'm

Bell Direct. Good morning, joined by Christine Ip from

States and more job report Christine. First to the United

fears there? Good morning,

Brigid. Well more job fears for Brigid. Well more job fears

the US and all eyes are the US and all eyes are on

those crucial US non-farm payroll figures which are due out tonight. We've also got US unemployment data and investors are are holding back ahead of

those numbers. Expectation is

for about 50 to 60,000 jobs to be created in August and

compared to 117,000 the be created in August and that's

previous month. Unemployment

rate is expected to remain at

about 9.1% and the sentiment and mood be betting on good so traders don't want to

be betting on these job

numbers. So we did see equities being offered even though

yesterday's data from the US was surprisingly good. There

was manufacturing growth and

jobless claims falling more

than expected so very volatile

session in the US last night.

US markets ended sharply lower despite gains early in the

session. What impact US economic data have on session. What impact did that

European stocks? It was much

more positive over in Europe. European stocks instead

manufacturing data out of the choosing to focus on

US and that did offset weak European manufacturing was reported yesterday. The European manufacturing which

European PMI fell to

August, that was much lower than economists predictions and

it's the first fall it's the first fall in September 2009. Among the

biggest gainers yesterday were

the UK financials. UK banks

rose off the back of speculation that regulatory

changes in the banking sector

might be delay. Those changes

are going to call business from the investment

operations. Yesterday we did

see Royal Bank of Scotland about 8%. The Nikkei in Japan see Royal Bank of Scotland up

had some strong gains yesterday

was that reflected around the

region? Sentiment was quite

positive around the Asian region yesterday. Most Asian

equity markets finished higher and supported by improvement s in Chinese an US manufacturing,

particularly in Japan where we did see the Nikkei up about yesterday announced plans to

invest $2.6 billion in a joint

venture between Sony u venture between Sony u and

a-Tash i. There were solid support from the Japanese steel

makers. A stronger yen and

lower commodity prices have meant reduced burden of raw

material costs for those steel

maker firms. So Kobe steel and

JFB Holdings two of Japan's

biggest steel makers were up be sidelined ahead of be sidelined ahead of that key

job starter out of the US. So while while investor sentiment

is positive falls in the US

will make it difficult regional markets today. Thank will make it difficult for

you, Christine, enjoy your day.

Let's take a look at what's happening in currencies and

commodities:

New figures show New figures show world

factory output slowed in August

as worries about the euro as worries about the euro zone

and US debt compound weakened confidence levels and there are increasing evidence slowdowns in

in different parts of the world are

another. Taken together the latest raft of reports signals factories around the globe are reducing analysts say, a slowdown in economic activity. Manufacturing in the EU Manufacturing in the EU zone contracted for the first time

in almost 2 years with a

leading index recording a

figure of 49 or a contraction. German factories which have

been supporting growth in the

bloc eased off the accelerator and French manufacturing and French manufacturing shrank

for the first time since July 2009. The from Germany, the EU's

strongest economy, showed it

slowed to just 0.1% in the

second quarter and that's

certain to feed into fears about a recession in Europe. In

the US a survey of the US a survey of purchasing

managers showed the factory

sector barely expanding in

August as the job market

struggles to pick um and

businesses confront sentiment. And China's businesses confront weakening

manufacturing activity recorded

only a slight rebound last important surveys. The HSBC purchasing

or PMI, rose to 49 pbt 9 in

August to 49.3 in the previous

month. Its lowest level in 28 months and the first

contraction in a year. A reading above 50 indicate s sector is expanding while the reading above 50 indicate s the

reading below 50 reading below 50 suggests contraction. Any slowdown in manufacturing could exacerbate

debt worries in both Europe and

the main driver of the global the US and sap Asian growth, the US

economy. It also further

complicates the task of policy makers addressing

concerns in Europe and the US

and for emerging market

officials who have spent much

of the year grappling with rising inflation and overheating economies. Euro

currencies on the disappointing slumped against major

European data. Well as we

heard manufacturing in the United slightly last month. The index

fell to 50.6 last month from 50.9. Though economists had

predicted the gauge would

to 48.5. There's been nervous reaction from investors and earlier I spoke to senior currency strategist at Thomson

routers John Noonan about the latest reading on the US

factory output. So what do

these figures mean particularly

the US? That's the big fear about a double-dip recession in

that the US is double-dip recession. Most

economists give it about a 30%

to 40% chance lit happen. We've

had a lot of mixed data recently. Normally recently. Normally if you're going to see an economy head for recession all the data's bad. We haven't really seen that but some of the forward

looking numbers are quite negative and the mood is just so negative as well. Lots of comments on Twitter this morning about it, of morning about it, of course, and I know BNP Paribas is prelickting - predicting a mild recession in the US. What does this mean for the Fed Reserve and more easing? They've left the door open for more quantitative easing. Ber Bernanke did in his speech. Other members have come out and said maybe this is what is needed right now and the Fed minutes last week suggested they even talked about it at their August meeting. So yes, the Fed wants to be seen to do something. The problem is with the US Government, the is they're hum strange now because of the because of the austerity programs being introduced in

the States. They can't spend any more money. The Government wants to be seen doing something. I think there's a good chance, particularly if

these non-farm payroll numbers tonight are very weak

tonight are very weak you will

see the Fed at least discuss it

strongly. This is the third

time they've spoken about quantitative easing or printing more money to boost the

economy, as you've sort of

mentioned it doesn't really

work, they don't have a lot of

it and when do markets in the

US - when do people in the US

say stop doing it? QE 1 and QE2

certainly did work that's why

they might have to do QE 3 and we're talking about a

double-dip recession in the US.

The Fed believes, at least the

doves on the Fed led by chairman Bernanke believe that

at least by printing more money that it will boost up that it will boost up asset

prices, it will boost up prices, it will boost up risk

and the hope is that risk

taking will translate to companies building companies building new factories people. The problem with QE 1

and QE 2 is it did build up

risk appetite but all the money

basically flowed out of the US into growing economies in Asia,

economies that really didn't

need the liquidity and so - and

the other problem with QE 1 the other problem with QE 1 and QE2 is it drove up commodity

prices and in fact it's creating problems in the US

economy because gasoline prices

are so high which is hurting growth. It raises asset prices. The asset markets love it the

commodity markets love it and the Australian dollar really

loves it and we could go past 1.10 again if they bring in QE

3. The effects on the economy

have not been shown to date. And of course similarly

in Europe where you've got

Greek bailout and lots of obviously economists talking about the fact that bailouts

don't work, where are don't work, where are things up to with the latest to with the latest Greek bailout? Europe is a mess, to put it bluntly. The problems

are basically is that for the

European Union to work for the whole concept of the euro to work, there needs to work, there needs to be fiscal consolidation, there consolidation, there needs to

be a fiscal union and Germany

is very reticent to do that. So we're where we're where up to now is we're where up to now is the German High Court is going to rule on whether these bailouts

are legal or not, that's next week and at the end of the

month the German parliament

will vote on whether or not

they approve the Greek they approve the Greek bailout,

they probably will but at same time there's no way, I

think, that they will build up

their rescue fund, the EFSF as it's known and that's really needed to backstop problems with sovereign problems with sovereign debt countries but also problems with their bank ing. What does

this mean for currencies

particularly the euro and the

pound, that hasn't escaped

it? Both should be affected negatively. It hasn't so negatively. It hasn't so far

because there's so much because there's so much focus

on the Fed printing money which

is so dollar negative that it's

an ugly major currencies. That's why gold goes up, it's a de facto currency. But it's very neg

negative for the whole consent of whether the

euro can survive will come to euro can survive will come to a

head in September when a lot of

these decisions have to be made about the bailout funds, about

the Greek bailout specifically so it is a very difficult situation and the biggest

problem is the flow back into

the banking sector and this is

where it affects the British pound or UK banks have a lot of exposure

to peripheral European banks,

Greek banks, Spanish banks in

particular. So if there's a

banking crisis running off this sovereign debt crisis then there's a problem not there's a problem not only for Europe but for the rest of the

world. And of course the major

concern of late has been Italy

and the contagion spreading to Italy. Have there been any

particular figures this week

that show where Italy's at? Well, the manufacturing

numbers, PMI numbers coming out of Italy last Italian economy is very, very

weak, just like all the

economies in Europe are at the

moment. That means they cannot

raise the revenue, that means they have trouble they have trouble paying off

their debt and - or keeping their economy running. Now

they're trying to go to the

market to raise debt but

investors just aren't buying. They don't trst - they're

atrade fraid of contagion. The

only entity buying I'll

Italian and Spanish debt right

now is the ECB and they will

hand over that responsibility at the end of They're doing that reluctantly

but without that yields in

Italian and Spanish debt will

get to worrying levels where they need a bail no money to bail anyone

out. That's the problem at the end of the day. There was so

much money spent during the GFC

that governments are running

out of money and so if there is any problem with the banking

sector it will go back to that.

Who's going to provide the

backstop? Last time around it

was the governments. To

Australia I know this week the

housing market figures increased supply, demand's

dropped off, where are we up dropped off, where are we up to

with prediction s of the Reserve Bank cutting interest

rates, what are your predictions? The market pricing in very aggressive RBA

rate cuts going out for the

next 12 months and just a

couple of weeks ago they were pricing the pricing the probability or

strong possibility of the RBA lowering rates next week. I think the comont comments from

RBA governor RBA governor Stevens indicates the RBA is still quite upbeat

on the Australian economy the Asian economy, notwithstanding the problems notwithstanding the problems in Europe and the US. So I think

there's no chance they're going

to be lowering rates in to be lowering rates in the short term and short term and the numbers that have come out since

particularly the retail sales

number yesterday was surprised

to the upsand the business spending numbers were very

strong as well, really confirms

in my mind that the RBA is

going to sit tight. As Stevens

said this week with all the

turmoil going on it's time to do nothing. At least Australia has that buffer, that that ki drop rates, America can't? That's right. Australia

and the emerging market countries, we saw Brazil lower rates earlier this week from

12.5 to 12%. There is all that

room to cope with another

global slowdown. global slowdown. The problem with the developed world is

that rates are at 0 right now and that's why they're trying

to come up with these QE and quantitative easing measures

really to show that there's

still a tool box left. John Noonan, we'll leave it there.

Thanks very much for joining

us. Thanks, Brigid. As we us. Thanks, Brigid. As we just heard, with concern growing another global downturn another global downturn short

sellers now have their eye on

vulnerable stocks. In the last

few months hedge fund managers

have been active on the New

York Stock Exchange targeting

Chinese companies. It's a move

which is fueling speculation

that China may not be able that China may not be able to

sustain its frenetic pace of

growth for growth for much longer. A symbol of China's economic

miracle literally came off the

rails last month with a

high-speed train crash claiming 43 lives. Now the first sign of

a much bigger derailment with

short sellers betting China's

economy will take a turn for

the worse. It is a big risk but I think if you do the

fundamental analysis of fundamental analysis of the numbers there is no doubt that

there are asset bubbles popping

up everywhere in China, not

just on equities but on other assets such as

Lee from the Centre for Independent Studies has noted

some international hedge some international hedge fund managers are short selling

stocks associated with

because China is a very fixed investment-driven economy with

the Government throwing too

much money into building too

many things that too few people need. The fundamentals tell you

that the asset price rises in

China, both in equity and in property, have nothing property, have nothing to do with profits, they have nothing

to do with the man, they have

nothing to do with return on

scenario like that and money's

being invested more for political reasons and speculative reasons speculative reasons rather than

economic reasons, when sentiment changes, and

sentiment will change, the

effects are very unpredictable. His view appears

to have been backed up in the

international monetary fund's annual review of China's

economy. The IMF report say ind

flation real estate bubble flation real estate bubble and weak monetary controls pose

significant risks to financial and macro

The leader of Norton Rose's China business believes the Chinese economy will continue

to grow strongly for some time. The Chinese have proven

themselves to be very competent

fiscal and monetary managers. I think they've generally pulled

all the right levers all the right levers at the

right time and the economy, I think, has gone through think, has gone through a

transition period and certainly

through the global financial crisis, you know, crisis, you know, very effectively. Short selling is all about

ahead of a downturn. Last year famous US hedge fund manager Jim Chanos Jim Chanos claimed it was a bubble 1,000 times bigger

thatten the Duby crash. He sold

Enron before its crark and

waged a successful short

selling campaign against the Macquarie Bank during the GFC.

Now he's short selling Now he's short selling all

metals and in particular the bulks, iron ore and coal, all commodities on courtesy of the China boom. There's been some big, very outspoken and very outspoken and in historical terms very right commentators saying that if

people can get their hands Chinese stocks in some sort of

size, especially in America,

they'd be looking to short them

if they can get the borrowing.

The fact is that China is The fact is that China is one

big bubble. I don't personally

believe that's going to be the

case. I see we are case. I see we are seeing huge amounts of development through. The short sellers are

are sometimes referred to as the vultures of the vultures of the market. If they do they do swoop on Chinese stocks Australia's resources sector

will be caught up in the

feeding frenzy. I do sense a

bit of a head in the sand approach in Australia. I approach in Australia. I think our our companies, particularly our

commodity companies, have

invested so much in the

continued rise of China, both -

well largely in terms of

increasing mining capacity for the future, that we don't

really want to listen to bad

news. There are always going to be those who are going to look

for signs of a slowdown indeed, you know, a more serious obstacle in China's

development story. But I think

that there are constant

challenges for the Chinese government and I think nothing in particular at the government and I think there's

moment that might be necessarily triggering that

short selling. I think the

Chinese do have their economy

under control. I think they've got a huge amount of reserves

which they can bring back at

any time they can use to

stimulate their economy if they

need to do that. China's

high-speed trains have now been

slowed due to safety concerns

but despite the risk, China's

economy looks set to power on.

Now to construction

Australia and it hasn't been a Now to construction in

good year for Leighton Holdings. Last week the

Australian builder lost its chairman and chief executive with much speculation that major shareholder Hocteif major shareholder Hocteif was

involved. Now mine ity shareholders

class action in shareholders have launched a

Leighton 's shock $900 million profit downgrade in April.

Commerce student Ben Lawson has

been investing in blue chip

shares for 2 years and she -

shares for 2 years and she - he

could see little risk in buying

$6,000 of Leighton shares in

March, a month after the company advised a company advised a full-year

profit of $480 million. I

bought Leightons because of their financial statements and they were in a very good

position at the time. But in April, Leightons ASX it expected to make a big

loss for the year of $427

million with $900 million million with $900 million in

write downs from 3 major projects. The desalination plant, the projects. The Victorian

Brisbane airport link, and its Brisbane airport link, and

joint venture project in the

Middle East. Investors like Ben

Lawson feel they weren't told

early enough and have now

launched a class action against the company. I feel like Leightons have acted

inappropriately, they haven't

kept up with their responsibility disclose information to

shareholders on a shareholders on a timely

basis. Our case is that those writedown s should have been writedown

announced in a much announced

stage. We say 2 or at the very latest the 14th stage. We say 2 November 2010

February this year when Leightons affirmed profit guidance of

million. Leighton Holdings was

not available for an interview

but said in a statement that

they will vigorously defend any

chief executive David claims of wrong

chief executive David Stewart

apologised to investors for apologised to investors for the

poor result but maintains they

were kept in the loop. If I really believe were well informed all the time. There's been some big

issues we've been dealing with

but I think we dealt with them

responsibly, quickly and openly

and we're moving forward

strongly from there. David

Stewart was ousted from the

company last week only after 8 months in the top job.

to the current problems facing Australia's retail industry,

even though retail sales in

July beat market expectations

with a 0.5% rise. The company is maintaining its guidance of low earnings growth this

year. It may be just a glimmer

of hope but after 2 negative

months the retail sector was

boosted by a higher than

expected jump in sales. They

rose by 0.5% in July beating analyst expectations of 0.3%. Spending in department

price of Myer and David Jones. immediately increased the share

But sales of clothing and

accessories outside the big

than 4%. The Retailers stores fell steeply down more

Association says overall situation is still Association says overall the

situation is still not good. Christmas is likely to

be quite weak and on the basis

of surveying we've done 40% of people told us people told us we're they're

going to be spending lance thast Christmas. The

liquor. I think people are

enjoying entertaining at home,

but food has done quite well

and alcohol has done

extraordinarily well across the country. But grocery distribution company Metcash, the suppliers of IGA supermarkets, say the figures

are hard to believe. I don't

see those numbers in our

numbers, you know, nothing's

happened to our market share.

Our market share is flat. We

still see the market as a very weak market. Still shareholders were buoyant as

Metcash's AGM in Sydney where Metcash's AGM in Sydney

the company announced its 12th success IFFive profit of. I'm very encouraged and

enthusiastic about the future

very strong company. Very for Metcash. I think it's a

competitive with the others and

much more friendly to do

business with. And I think if

any company is going to counteract and Woolworths it will be

Metcash. I remember looking at

my porridge this morning and I

looked at the milk underneath

it, it was so thin I couldn't

believe it so we need Metcash

to put real milk on the

table. After winning its court battle against the Australian battle against

commission Metcash outlined its competition an consumer

plans to buy Franklins. It told

shareholders as long as the ACCC doesn't appeal the deal

will be completed by the end of

this month. All Franklins

stores will be rebranded IGA or be chosen to run the individual

interest for stores. 200 expressions of

interest for plus minus 80

stores, from IGA retailers around around the country , from other

States, from other countries

that would like to invest in

Australia and what's happening

now is we're choosing the retailer for each store. Shares now is we're choosing the best

in Metcash finished up 1.5%. Mining companies in

Mongolia are rushing to clean

up their act in the middle of the country's gold boom. Mon - Mongolia's nomadic the country's gold boom. But

herders are furious their traditional grazing land is

being given over for the search of gold. There's never been a

better time for a gold rush mining companies in Mongolia better time for a gold rush and

can't dig it up fast enough.

TRANSLATION: The price of gold

has risen steadily for the last

3 years. Of course this is

excellent news for us gold

producers but we're afraid the

price might fall again just as

sharply as it rose. The price looks safe for the time being.

Spot gold has fallen back from

its peak over US ounce but hasn't retreated ounce but hasn't retreated far. The bigger issue for Mongolian mining companies is the

company's waive of

environmental activism.

the population are nomadic

herders who rely on the rolling

grasslands for their

livelihoods and they're angry

at the ever increasing at the ever increasing number of gold pits.

TRANSLATION: We herders will

lose our pastureland if mining

continuing to increase here. 2 mining companies in the mining companies in the valleys

near here built their mines will dry up as well. TRANSLATION: TRANSLATION: There should be

very few mines, not hundreds of

companies digging up Mongolia's

entire territory. Several important mining projects

should be allowed but should be allowed but other deposits should deposits should be for-Biden. This for-Biden. This former herdsman was arrested after his

frustration drove him to lead a

pointed attack on a local

government building but while Mongolian authorities don't

take well to bows and arrows

they have made significant

concessions to activists

banning mining near rivers forests forcing the close yr -

closure of 18 gold mines in one

region alone. region alone. So-called ninja

miner x herders turned gold

dirgs are hoping to cash in and

strike it rich. Let's take a

look at what's making headlines

around the region. The around the region. The Standard

says Chinese Premier Wen Jiabao

plans to keep a tight rein on

inflation with the rising consumer price 'Financial Times' reports South

Korean inflation has hilt a

4-year high with the 4-year high with the pressure

on to raise interest rates

there. And that's all for this edition of Business Today. edition of Business Today. I'm Brigid Glanville. Thanks for joining me, enjoy your day. Closed Captions by CSI This Program is Captioned

Live. This morning - she's not going anywhere. Julia Gillard

denies leadership speculation

but the Opposition says it's

time for change. If they can't get their act together we do

need an election because at the moment this is a country

virtually without a government.

Australia pledges $4.5

million in aid to Libya as world leaders hail the country's new rebel rulers.

They still have a huge hill

to climb here. They don't yet

have their whole country

secure. And a traumatic day for

Australians at the tennis. 3

players bow out in players bow out in straight set losses.

A very good morning,