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Good morning. Welcome to the program. I'm Whitney Fitzsimmons. In 'Business

Today' - Shanghai sneezes and

Wall Street trips as

nervousness returns to global

equity markets. On hold now,

but not for long. Australian

interest rates on the way up. And popping the cork on

Australia's best wine. The new

marketing strategy. Those Australia's best wine. The new

stories shortly, but first, a

quick look at the markets.

For more on market action

I'm joined by David Taylor from

CMC Markets. We saw Wall Street

lose ground overnight? Yes, it

certainly did. Really off the

back of the Shanghai composite

dropping around 6% overnight. It didn't do the market any favours. There was a

favours. There was a flight to

quality last night, especially

stocks in basically materials

and the energy sectors and

industrials really took most of

the punishing by sellers.

Looking at the UK, home prices

there have risen for the first time in two years. Why was

that? They have. It's the lack

of supply, really. The housing

market has been very untouched

for the last 6, 12 months. But

now there is a lack of supply

as far as the UK housing market

is concerned. Obviously that

may change moving forward, but

as far as house prices in

England and Wales are

concerned, they did rise about

1% in April, which suggests

that at the very least, a

recovery in the housing market,

whilst it might be improving,

will be a very slow process.

Let's look at Europe. There's

been some news on consumer

prices there. What can you tell

expected. us? They've fallen less than

expected. We've got prices in

the euro region falling around

.2%. Economists had expected

them to fall around .3%.

Importantly, we look to I guess

the implication for interest

rates. It looks like interest

rate also probably be kept on

hold at around 1% for the short

term, with a possibility of

moving up in the medium term.

Inflation shouldn't really be a

problem in England for, I would

say, probably until 2010,

say, probably until 2010, 2011

at the absolute earliest. It's

just not an issue at the

moment. Then they might be

reconsidering things. But at

the moment it's those

indicators which suggest the

status quo at the moment. How

will regional markets perform

of yesterday. Obviously today? It might be the reverse

yesterday we had the banks

performing well. Energy and

materials not performing so

well. But last night we did get

an increase in base metal prices and we also had gold up

a little bit. So

a little bit. So material

sector might do OK today. What

may weigh on the market today

of course is the banking sector

after Wall Street fell last

night and we might get some

weakness amongst energy

producers with the prime of oil

falling over $2 last night. It

might be a fixed session, but

most of the selling will

probably take place in the

first hour or so. Just before we go - let's look at

greenback performing currencies. How is the

greenback performing against

the other majors? It's weaker

against the yen and stronger

against the euro and the pound, but certainly the weakness

against the yen largely to do

with the change of government

yesterday. People pushing much

further into the yen than the

US dollar. Of course, equity

markets in the US had an impact

on the dollar as well. David,

thanks for the update. Thank

you. David Taylor from CMC

Markets there. Now let's look

at what's happening with

currencies and commodities. at what's happening with

It's widely predicted the

Reserve Bank of Australia will

decide to keep interest rates

on hold at its board meeting

today. But by the end of the

year, it could be a different

story. After a 49 year low of

3%, the official rate is

expected to rise by 25 or 50

basis points. Off the back of

more positive economic data.

employment expected in the With no dramatic collapse in

short term, and retail spending

economists still strong, the country's top

economists are predicting the

Reserve Bank will lift the official cash rate sooner

rather than later. If the

emergency's passed why are you

sitting there at an emergency

level with the cash rate? We

thought it was appropriate that the Reserve Bank should start

tapping rates back up soon. It

certainly looks like we're

closer to the point where the

emergency rate cuts that we had

last year sort of - the need

for those is coming to an end.

I mean the global financial for those is coming to an end.

crisis is not over, but the

worst of it seems to be

passed. The market is racing

to price in higher cash rates

by year end. JP Morgan and the National Australia Bank now say the official cash rate will go

up before Christmas. While

Westpac, ANZ, the Commonwealth

and UBS all expect rates to

increase from next year. The

data continues to surprise on

the upside, both locally and

offshore. And there's more and

more pressure building on the

Reserve Bank to get that cash

rate up to a level that's less

stimulatory than it is now.

Among the raft of economic data

out, the Bureau of Statistics released its June quarter

business indicators. The

economic slowdown has continued

to crunch company profits,

quarter, taking which were down 7.8% this

quarter, taking the annual

falls to around 15%.

For the third consecutive

quarter, companies have run

down their stock. Firms had a certain amount of inventory on

hand, but in fact, the stimulus payments that the government

made and in fact the Reserve

Bank's very aggressive rate cuts I think stimulated demand

to such an extent that firms

are were caught out. They've

had to run down their

inventorys to meet that

demand. Meanwhile the Reserve

Bank's credit statistics

revealed credit growth is

slowing as consumers and businesses continue to cut back

on borrowing. But that hasn't

stopped the sales of new homes

which were modestly higher and

a 5.9% national rise in house

prices for the first seven

months of the year. No doubt

first-time buyers have provided

the early momentum but we're

now seeing upgraders to be sure

and investors return to the

market. That news, combined

with the expectation

Wednesday's GDP numbers will be

modestly positive, might well

be enough for the RBA to

trigger its tightening cycle

next month, and push the cash

rate towards a more normal

level, which the RBA governor

says is a good deal north of 3%.

India has reported 6.1%

growth for the April to June

quarter compared with a year

earlier. The expansion was in

line with expectations and due

to an increase in consumer

spending and interest rate

cuts. The news comes after a

rise of 5.8% in the January to

March period, but a heavy

drought is threatening to curb

harvests and rural incomes, and

could weigh on the country's

rebound. As the worldwide

rebound. As the worldwide slump

hit India, Manmohan Singh's

government cut taxes and

stepped up spending to cushion

the economy. Investors appear

to have confidence in the government's economic

management. The Bombay Stock

Exchange has climbed by 16%

over the last week. Tightening

credit conditions and concerns

about an overhang of stock have

led to continued volatility on

China's equity markets and

pushed the Shanghai composite

index down by 22% from its peak

in August. For more I'm joined

by Lleyton Hewitt senior

international economist from Westpac.Ed good morning, welcome to 'Business

Today'. Good morning. So the

benchmark Shanghai composite

index suffered a nearly 7% fall overnight. What's behind the

sell-off? Well, I think it's

really the confluence of a

number of events. We've had a

lot of rumours and hearsay for

many weeks now that there will

be something on the tightening

front emerging at the

macro-level in China. It's not

necessarily my view but the

market is certainly very

jitterly about this. They're also jittery about a slowdown

in new lending growth in the

second half of the year with

many attributing the move in

stocks in excess liquidity inside the economy. That really came to a head yesterday with

the big fall. Some

the big fall. Some analysts

are saying that Shanghai's

index may fall further by 25%.

Do you agree? The regular

volatility of the Chinese

equity markets would more than

encompass a 25% fall. This is

is a market that actually in

2008 performed a 70% peak-to-trough collapse. I

don't actually think that we're

dealing with the collapse here.

What I think - market is

actually just nervous about

what the policy environment

might bring. I really do think

that the market isn't

overvalued. In 2008 when the

crash came, the price-to-earnings ratio was

above 50. Now it's around 30

which is very close to long-run

average so my intuition tells

me that this downturn will be

relatively shallow versus the

one we saw in 2008. Even so, in this

in this downturn, China stocks

are trading at very discounted prices. Isn't this an

opportunity for investors given China's strong potential for

growth? China has immense

potential for growth as you

note, and really the world

economy is running on one

cylinder at the moment and that

is the Chinese economy. I'm

talking about private final

demand and not fiscal stimulus

of course. How that relates to

the equity market is actually a

little bit oblique, in the

sense that the Chinese equity

market is somewhat divorced

from trends in the real economy

and has been for a very long

period. That's why it is so difficult to call. If you just

looked at the macro-economic

backdrop you'd actually be

saying equities should be rising right now because as you

say valuations are good, the

economy's recovering, profits

are recovering, and inflation

is actually falling, whereas

the last time we saw a crash in

the Chinese equity market, inflation was high and

inflation was high and rising

and that's why you got the

policy response. So in light

of that, how concerned then

would the central government be

about all this

volatility? Well, I think why

the central government is

concerned about the equity

market is its impact upon

overall confidence. And

confidence is a very fragile

thing at the best of times. But

when you're only six months

away from the trough in global

and Chinese growth, confidence

is something which is to be

kept elevated at essentially

all costs. I think that the

Chinese Government will be

very, very worried about the

potential cascading effects

upon the sentiment of consumers

and businesses if the equity

market were to fall too far,

too fast, and therefore, I

wouldn't be surprised if we

actually saw some kind of

tinkering with transaction

costs in the market, a

reduction of stamp duty perhaps, just to encourage people back into

people back into the market and

put a floor under prices.

Unfortunately, we're out of

time. But thank you. My


The Walt Disney Company will

take over Marvel Entertainment

in a surprise announcement

agreed overnight. Marvel is

home to characters like

Spiderman, the Incredible Hulk and the

and the X-Men. They'll join

other characters already owned Mickey mouse and hundreds of

by Disney. The announcement

boosted shares in Marvel but

the deal still has to be

approved by anti-trust

authorities and Marvel

shareholders. The deal is worth

approximately $4 billion. It's

the first big takeover by

Disney since is bought Pixar in

2006. Investors have

2006. Investors have welcomed

news from ANZ's half yearly

market update. The fact it

contained no startling

revelations pushed its share

price up 4%. Profits at the

lender remain in line with previous guidance while

interest margins continue to

grow. With an eye on showbiz,

Mike Smith called it the

Seinfeld update. ANZ's trading

update about nothing. So

there's not a lot new in this

trading update, which I guess

trading update, which I guess

is good news. The economic

cycle is playing out very much

as we told you previously, and

the business is performing as

we expected. So there are no

real surprises in the update.

But in these risk averse times

a reassurance like that still

comes as a welcome relief.

ANZ's share price rose by 4% on

the release of its update for

the first 10 months of the financial year. Among the key

points: cash prast is broadly

in line with 2008; lending

growth in residential and

commercial property has been

offset by a decline in

institutional banking; and net interest margins are growing.

That means the return the bank

gets from money it lends out is

increasing compared to the cost

of obtaining funds. We're

getting good-quality narrative.

The Australian economy where

these banks very much leveraged

these banks very much leveraged

to does seem to be improving

significantly. The actual pick

turt of the banks at the moment

seems much more transparent and

people are quite happy to think

attractive earnings going the banks will make some very

forward. However the major

banks' bad debt exposures

continue to rise. ANZ's

impaired loans grew by 7% in

the June quarter. But that's a

slower rate of growth than

before, helping to boost investor confidence that the

worst of times may be

over. Certainly, there's no

deterioration in our provision

outlook for this year. What

this means is for this half,

and the first half of 2010,

we're going to bump along the

bottom with provisions at about

the current level. None of the

four bank leaders has claimed

that things are getting better

yet but they're certainly not

getting worse in any alarming

way at all. And I think it's a

matter of washing these things

through the system. Mike Smith

says the purchase of the Royal

Bank of Scotland assets in Asia

marked a turning point for the

group, demonstrating its focus

on growth and the ambition to

become a superregional bank. However, ANZ's joint venture

with ING is the bank's only

foray into wealth management

foray into wealth management

and analysts argue the bank is

lagging its peers in that

area. It's only about 4% of

their cash earnings. Compared

to CBA, they make about 16% of

their cash earnings by the

wealth management side of

things. In the compulsory super

area, analysts would like to

see them take more

them. The advantage. It is a problem for

them. The wealth management say

it's not fully owned or under

their chrome. They moved late

and less in that area. And the

others will be reaping a

benefit as markets improve.

Mike Smith has conceded that

ANZ now has excess capital. The

question for the bank is

whether to use those funds to

buy out ING's 51% stake in the

wealth management venture, or

look for another acquisition


Tata Motors has posted a net

loss of $67 million in the

first quarter on weak demand

for its Jaguar and Land Rover

models. The company acquired

the British brands for $2.3

billion from Ford in June 2008.

It's been trying to cut costs

in order to lift profitability.

The losses at India's biggest

car maker mirror the current

state of the broader automotive

economy industry. A slowing Indian

economy has also hit sales of

the company's trucks, buses and


Caution has returned to to

encouraged an increase in commodity markets and has

selling, sending base metals

broadly lower. Investors and

producers are hedging their

bets on signs of weaker

fundamentals across major

economies, including the

resource-hungry China. To look

at this I'm joined by Jonathan

Barratt. Good morning, welcome

to 'Business Today'. Good

morning, Whitney. Now, we've

just heard about falling equities in China. What does

this signify for commodity

prices? I eye think it

basically sends us a message that perhaps the Chinese

authorities are concerned at


this overcapacity. It could

actually signal quite a

significant sell-off in some of

our commodities which we have

to be cautious about.

Overnight, copper plunged the

most in two months. Zinc prices

also declined in Shanghai. Is

that signalling slower demand

for industrial metals? Yes, it

is. What it's actually saying

is that the signal from

Shanghai, the signal from the

central government there, and

central government there, and

actually, the build in

inventories in copper and zinc

particular my in China are

telling investors that perhaps

we haven't got that demand and

as a result we've seen this

sell-off so I think it's that

oversupply. It's a lot of

things which are coming to a head at the moment which is

causing this sell-off. How

concern something that for

resources, the resources sector? Look, I

sector? Look, I think resource

sector has been very strong for

quite some time. And I think it

will be a good chance actually

to come back to some good

value. When you look at all the

markets they've moved

astronomically over the last

couple of months. So I think if anything we're going flew a

settling period, particularly

commodities and that's

certainly going to hurt some of our resource companies just in

the short term. You think this

is a short-term fall and that

we're set for a bit of an uptick further doesn't

uptick further doesn't track? I

think so I just think this will provide us with a good opportunity to see a lot of

those metals come under

pressure, come back to

realistic levels so we can then

see that growth. I think I'd

see its a an opportunity to buy

some once we can see a low in

place. Let's look at oil. It

plunged by over 4%. What's that

linked to? I think oil has been

a very hard market to trade.

We've seen the

We've seen the fact that the

inventory builds similar to

base metals continue to build,

which gives us a clue that we

are running and we're not

consuming what we're producing.

So oil last night came under

pressure. It's finding it very

difficult to breach this $74 a

barrel. So if it can't get

through it, we actually feel it

should come lower. I think we

should probably see if it

breaks through this or stays

below 70, we could

below 70, we could actually see

it target down to US $66 a

barrel. That will be good news

for those going to pump,

really, won't it? Very much

so. Let's move on to gold.

Now, that rose for a fifth day,

the longest run of increases in

more than a month, but can it

maintain these gains? You see,

gold's actually been quite

boring. It's sort of stuck in

this range, but now we're

pushing through to that top

end. I think it -

end. I think it - if it needs

to get through this level if

we're going to see the US

$1,000 area, I don't think gold

can move by itself. I think

this needs to be dragged up through that area, and that

could be on the back of what

has happened in the platinum

market. I will get to that in a

moment, but gold is

traditionally a flight to

safety. So is it indicating

that there is less confidence

in the global economy recovery

story then? I think you can say

that. The fact that it's not

moving higher. If in fact we

are going into more of a

recovery phase, then gold

should come back. But at the moment, it's just sitting in

this range. I think it's

frustrating for a lot of the traders, because it is in such

a tight range. So if we can see

it actually break through this

960 level, then we should see

it trade to 1,000. But if we

see this continued recovery,

then you will probably find that gold

that gold should actually level

off and perhaps even come lower. You mentioned the

platinum sector. Let's look at

that. It's another precious metal. South Africa produces

the majority of that. What's

happening there that could

impact the supply? This is

quite interesting. South Africa

produces 80%. We've got two of

the largest producers, Anglo

Platinum and Impala, all

Platinum and Impala, all suffering from labour disputes

at the moment. What we can see

is that coming into this period

of the year, when we see

traditional demand, we see a

recovery for cars for catalytic

converters where we need

platinum, we could see a

squeeze in the metal in terms of supply. That

of supply. That could propel

prices higher. That could see

gold trade and test the US

$1,000 mark. I just want to

ask you, the commodities sector

seems incredibly subjected to

geopolitical concerns. What

should producers do to buffer

themselves from that? They just

really need a very good solid

team of risk management people

behind them. So that they can take advantage

take advantage of the volatility in the market. Because it's the right thing to

hedge, but it's also right

thing to take advantage of the

movements in your favour. So

they really need a good risk

management team to be able to

combat this high volatility or

this period of high volatile. Unfortunately we're out of

time, but thank you. Thank you.

Some of Australia's major wine families are joining

forces to fight the image overseas that Australian wines

are down-market and cheap. In

2008 in was a 20% drop in

Australian wine exports partly

due to the perception that

Australian wines don't measure

up to fine wines from other


In South Australia's Clare

Valley, the first buds of

spring from burst in the riesling vineyards. For the

Barry clan, it's the start of

their 5 1st vintage. We really

do rely on winter rains. We've

got plenty of water in the

dams, smiles on our faces so

we're looking for a good

season. The Australian wine

industry grew from hundreds of

industry grew from hundreds of

such family vineyards. Some

sold their grapes to wineries,

while others chose to make

their own drops. The idea was

to bottle wines for drinking of course, and once you start

doing that you make them much

better than you do when you're

lending from somebody else.

But starting in the 80s the

industry surged. Exporting

cheap wine, particularly to

supermarkets in the UK. As a measure of

measure of its success, in

1982, wine exports earned $14

million. 25 years later, that

had risen to $3 billion, making

Australia the fourth largest

exporter after Italy, France

and Spain. That was all based

on brand Australia, sunshine in

a bottle, cheap, lovely,

enjoyable, glug it down, move

on. And unfortunately, that has

on. And unfortunately, that has

taken attention away from these

regional wines, with real

people, real faces, real

personalities, and as I say,

very good wine. We were naively

assuming that our marketing was

working, and that consumers

particularly around the world

were taking notice of our

better wines. I think what's

come to pass is that that's not

the case and we've actually got a lot

a lot of work to do. Lovely

intense spicy pepper. It's just

... Jumps out of the glass.

This man is the fourth

generation of his family to run

a winery in central Victoria.

Three years ago he sensed

Australian wine was being

categorised as a one trick pony

and so gathered together the

most influential family-owned

winerys to fight back. We

winerys to fight back. We set a

very high bar for the

membership criteria. We invited

26 winemakers initially who we thought might supply to the

criteria. Of the 26, 16

complied and of the 16, 12

desigh they wanted to become

part of First Families. I think

there's something like 1,200

years of winemaking between us

all. There's lots of heart

all. There's lots of heart and

soul in Australia and

Australian wine. There's lots

of bricks and mortar and lots

of history and heritage. We

need to bring the perception

closer to reality. Now a look

at what's making headlines. The

'Standard' reports the metallurgical corporation of

China is set to become the

biggest listing on the Hong

Kong exchange after being

approved by regulators. The

'Financial Times' highlights the

the record of $4 billion

takeover of Nar vel by the Walt

Disney Company. And that's all

for this edition of 'Business

Today'. If you want to look

back over any of our

interviews, please visit our

web site. We look forward to

your feedback. I'm Whitney Fitzsimmons. Thanks for joining

me. Enjoy your day. Closed Captions by CSI