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Good morning. Welcome to the

program. I'm Whitney

Fitzsimmons. In 'Business

Today' - nervous investors.

China's spying claims send Rio

Tinto's shares south. Auto

auction. The new on-line

marketplace for General Motors.

And - asleep on the job. It's

no longer a sackable offence.

Those stories shortly, but

first, a quick look at the

markets. Taking a look around

the region now, where there was

a mixed decision on Asian

markets.

I'm joined by David Taylor

from CMC Markets. Good morning.

So stocks on Wall Street have

kicked off the week in the

red? Yes, they did. As was

consistent with worldwide markets. Look, it's to be expected. A bit of profit

taking, a bit of investors

taking cash off the table. Last

night in the US, it was the

retail and material sectors

that were hit very hard. After

such a good broad based rally

over the last couple of weeks

it's not surprising. Investors

now awaiting the results from

the federal open market

committee later in the week and

also retail sales. Still in

the US, interestingly according

to a survey of the economists the worst US recession since

the Great Depression will

probably end in the third

quarter? We have economists

agreeing with one another!

About 90% of the people in the

survey in the blue chip

economic indicators survey, 90%

of economists growing that the

third quarter will probably end

the recession. The economic

adviser to Barack Obama and

Paul Krugerman, both pay Greig

that August, September, October

are the likely months to see

the end of the US recession.

The key threat is the housing markets. Positive signs though in the unemployment area.

Hopefully they're right. Let's

turn to Europe now. How have

Rio Tinto's shares performed in

light of the Stern Hu case? Not

great. They were down 78.5

pence in London trade. Also

down over 3% on trading in the

ASX yesterday. It's not the greatest situation for Rio

Tinto to be in, not simply

because Stern Hu's still under

arrest, but more to the point,

investors are worried about Rio

Tinto's ongoing relationship

with China. Until this is

worked through the system, it's

an ongoing issue for investors.

So until it's resolved there might be hesitation in trading

in Rio Tinto shares. Let's

look at the region now. There

are more company results out of

Australia. What will the

highlights be? Today we've got

Cochlear and Primary Health

Care delivering their full-year

results. The health care

industry has held up

reasonably well in the 12

months. The one to watch JB

Hi-Fi. Be interesting to see

how they perform given the retail signals have been a bit

mixed over the last couple of

quarters but we expect a good

result from them today. In

economic news, there's a

decision due out from the BOJ

today. What will we see? As far

as the interest rates are

concerned the overnight lending

rate we're looking at staying

at .1%. That's pretty

consistent with what we've seen recently. It doesn't look like

it will be moving from there in

the foreseeable future. What we

need from Japan though is

sustainable economic growth.

We've got some good signs, I

suppose, over the last couple

of quarters that there may be a

turnaround about to take place

but they will need to keep

interest rates low simply

because as they see it the

outlook is very uncertain.

Continuing with economic news - China's inflation figures are

due out as well? Absolutely.

We're looking for it to move

from negative 1.7% to negative

1.6% largely on a falling oil

price but again, a very

interesting one to watch. The

China inflation story has been

very much one on the forefront

of economic advisers' minds for

at least the last 12 months.

Thanks for the update. Thank

you. Now let's look at what's

happening with currencies and

commodities.

Shares in Rio Tinto have

gone into freefall after

Beijing intensified its spying

claims against the company.

Analysts say latest development

in the Stern Hu case has added

to investors' nervousness.

Stern Hu was leading iron ore

price negotiations for Rio

Tinto with Chinese steel mills

at the time of his arrest over

spying allegations. But the

bitter bs and diplomatic row

caused by the arrest do not

appear to have dampened China's

appetite for Australian steel.

It is an $18 billion

minefield.

Dividing on one side the

world's biggest iron ore

exporter, Australia, on the

other by far its biggest

customer, China. The dragon

nation, devouring almost

two-thirds of ore exports or

183 million tonnes last year,

to feed its great need for cold

hard steel, vital to the

massive modernisation of the

Middle Kingdom. But the rift

between buyer and supplier

began last year when the

biggest Australian producer and

lead price negotiator with

individual Chinese steel mills,

Rio Tinto, struck a dramatic

85% hike in benchmark prices

for iron ore. Ever since,

pricing has been a volatile

subject for all Australian

producers. There's no question

the Chinese are certainly a bit

grumpy. They're grumpy about

the very strong increase that

prevailed last year. It's going

to take a bit of time before

the previous bridges can be

rebuilt in terms of the

relationship between the

suppliers and the consumers.

The wrath of the dragon.

Emboldened this year by global

financial doldrums, falling

Chinese exports and rising iron

ore stockpiles at its portses,

China's State controlled iron

and steel association took over tense talks on iron ore prices

from steel mills, demanding a

45% cut from Rio Tinto and

others. Rio offered just 33.

The deadline for settlement

passed anxiously. Four days

later, Rio Tinto's head

negotiator in Shanghai, Stern

Hu, and three of his team, were

arrested and accused of

stealing state secrets. Placing

enormous pressure on Rio Tinto,

but has it really helped the

Chinese negotiating position on

benchmark iron ore prices? I

don't think there has been any

real material impact. I think

we need to look beyond these

arrests and at the bigger

picture. The arrest is only a

small blip in China's, I guess,

demand because it's just going

to keep storming on. We've seen

steel prices reaching 2009

highs as of this week. So as

steel prices recover, as steel

companies in China become more

profitable they're more capable

to absorb higher iron ore

costs. The Chinese Government's

program has been extremely

effective. The Chinese economy

already shapeed a V shaped

recovery this is the reason why

China has been leading the

global economy out of the

recession. The implications

for Australia are prove found.

This year, exports to China

generally grew 17.5% in the

first five months, as exports

to other countries dropped

13.5%, where once the lucky

country rode comfortably on the

sheep's back, now is clings to

the tail of a rising dragon.

Australia's Bendigo and

Adelaide Bank is the first of

the nation's financial

institutions to report earnings

and it's no surprise the

numbers are fairly dismal.

Profit has more than halved,

margins are being squeezed and

it's heavily exposed to the now collapsed agricultural firm

Great Southern but the Australian lender says credit

quality overall is good and

it's aiming to raise $300

million to strengthen the

balance sheet. Bendigo and

Adelaide Bank has long

trumpeted its unique community

banking business model. But as

the financial crisis unfolded,

the group found itself in the

same boat add its bigger rivals

with tumbling profits and

rising bad debts. The bank's

2009 profit after tax has more

than halved to $84 million.

Cash earnings are 24% lower in

a result that was largely

flagged through a market update

last week. The bank blames the

slowing economy and continuing

pressure on net interest

margins. The difference between

the price at which it lends to

customers, and the cost it

incurs to obtain funds. So we

have seen the dip. We've

experienced the dip. We've

taken that on the chin. We've

dealt with that in our P & L.

The majority of that was in fact in the second half but

we're confident that it has

come back to where it was in

July 2008, and we believe it's

sustainable at the current

market at that level. Obviously

interest rate changes aside.

The bank says credit quality

remains sound and arrears

levels are falling. However,

bad debts are still a concern.

The biggest single risk is

Bendigo's $550 million exposure

to the failed managed

investment scheme the Great

Southern Timber Group. The bank

says a $25 million provision

for bad debts against the Great

Southern loan portfolio is

appropriate for now. EL & C

bail ewe's Stewart Oldfield

says analysts will also be

watching bend go's exposures to the commercial property

market. In the early 90s, it's

what hurt the major banks the

most and already you've seen

falls from as much as 20% off

the peaks. So there are some

good signs that the market

might be stabilising but it's

still a key swing factor for

all the major banks. To address

the continuing threats to its

balance sheet and provide funds

for expansion, Bendigo and

Adelaide Bank is embarking on a

$300 million capital raising at

a 17% discount to last week's share

share price. China Eastern

Airlines has returned to profit

in the first half on rising

domestic travel and gains from

fuel hedging contracts. The

company beat expectations

making $144 million. It

continues dro --

compares with a loss at the

same time last year. It now

joins Cathay Pacific and Malaysian Airlines in making

gains after the price of oil

rose in the first half. It says passenger

passenger numbers also jumped

by 15%. China Eastern is set to

take over Shanghai Airlines in

an effort to increase its share

of travel in the mainland's

financial capital. India's

private airlines have demanded

the government reduce airport

charges and sales tax on jet

fuel. The federation of Indian

Airlines met the aviation minister to put their demands to him. The

to him. The federation is made

up of tof private airlines in

India. They were threatening to

strike from August 18th, but

have put the plan on hold to

save thousands of passengers the inconvenience. Airline operators want the government

to reduce taxes on jet fuel to

a flat national rate of 4%. The current arrangement says

differing taxes across several

States which average out at

28%. For the latest housing

loan numbers out of Australia

provide more evidence the

economy should be in for a soft

landing. Demand for home loans

continued to grow in June and

there are encouraging signs

it's much broader than first home buyers lured by government

grants. But the recent pick-up

hasn't helped housing supply

company Crane Group, who had a

disappointing year. Dodgy US

home loans got the world into

the global financial crisis,

for Australia at least, it

appears home borrowing may lead

us out out of the downturn. Lending for

construction is up 61.1% since

the lows of last year. That

does suggest that residential

construction will recover quite

soon. The number of loans

jumped more than 1% in June to

just over 65,000. And the good

news is that loan approvals are

still rising, even though the

proportion of first home buyers

is falling as government

incentives are wound back. But

while the strength in recent

economic data has prompted the

Reserve Bank to lift its growth

forecasts and seen financial

markets pricing in interest

rate rises, on the ground,

corporate Australia is still

doing it tough. Crane Group,

which manufactures and distributes pipeline systems as

well as selling plumbing and

electrical supplies has seen

full year earnings fall 28%

even after slashing nearly a

quarter of its work force. We

had a pretty strong first half

of the year. In about November

things took a step down. We've

seen our sales at those

consistent levels through to

the end of July. So unless we

see a marked improvement in

sales over the coming months,

we don't see our profits

improve this year on what we've

just - the year we've just

completed. This man covers the

group for JP Morgan. He says

the company like many others is

a victim of the downturn in

overall construction

activity. The problem with

Crane this year is they've had a real dose of economic reality

there has been a big slowdown in several construction spend

and major projects, and that's

made itself felt on their

earnings. It wasn't the best

result they've ever delivered

but it's not far off the record

number, so it's not as bad as

you mites think. While Crane

Group's Tradelink division has

benefitted from the Federal

Government's attempts to

stimulate the economy through

small shovel-ready projects,

it's the lack of spending on

bigger infrastructure

developments, both public and

private, which is hurting the

group, along with its high

exposure to the struggling New

Zealand economy. It's for those

reasons the company is

predicting all this year's

profits will come from the

money it saves on reduced staff

costs. Meanwhile in China there are increasing signs that a

property bubble is forming

after the nation recorded a 60%

rise in real estate values in

the first seven months of the

year. Sales accelerated by 53%

in the first half from a year

earlier, while property

investment rose to 11.6% up

from 9.9% in the six months to

June. And home prices in 17

major cities advanced 1% in

July from a year earlier, the

biggest increase in nine

months.

Another proposed Chinese bid

for an Australian resources

company is set to be closely

watched as a test of the

Australian Government's

attitude to Chinese takeovers.

Yungyo coal mining is planning

to acquire Australia's Felix

Resources. Trading of both

companies was halted and the

news boosted the prices of

other Australian coal firms.

It's a sign of China's continued appetite for Australian raw materials despite Rio Tinto's ditching a

deal with Chinalco earlier this

year. I'm joined by Jonathan

Barratt for more on this issue.

Welcome to 'Business

Today'. Good morning. Do you

think the failure of the

Chinalco deal has dented

optimism about more Chinese

investment in Australia? Not at

all. We still have assets and

China still needs raw

materials. The Chinalco was

just a blip and there's a lot

of confusion what's going on.

But when it comes to coal and

other inputs I think it's

certainly ripe for the taking.

So I think China's activity

here will continue to climb.

How important is this latest tilt at an Australian company

by a Chinese firm in terms of

being a litmus test to look at

the Australian Government's attitude? It will be

interesting. I think when you

look at - it's the second

largest deal, as obviously of

course Chinalco didn't go

through, $3.9 billion. The

interesting one here is how the

Foreign Investment Review Board

will treat it, because the

actual takeover will give the

Chinese company that ability to actually control the resource.

And this will be the first time

that that actually occurs. So I

think it will be a test. It

will be interesting to see what

Mr Swan has to say, because for

the first time, it gives

control of the company to an

international company. What do

you think Mr Swan will say? I

think at the moment - I think probably he will probably say

"yes". I'd like to think "no".

But I think that they're

looking to mend relations, and

I think they're looking to

consolidate what's on offer as

well. Remember that China does

consume obviously a lot of

Australian coal. You'd like to

think no. Why is that? I

honestly think it's probably

wise to keep control of the

asset in Australia. Mainly

because you have a certain

amount of ownership I guess

back to Australia, and I think

I'd like to see profits return

back to Australia and back to

Australian infrastructure,

rather than seeing them go

offshore. So if anything, I

sort of believe that we should

have more control of our own

assets. How likely is it

we'll see further tie-ups in

the sector? We've only just

heard Peabody from the States

saying they're looking at

assets in Australia. The coal

sector in terms of pricing,

we're getting to the levels

where some of these assets

really do look attractive when

you look at the future

prospects and the need for coal

down the future. 80% of China's

thermal power stations are

fired by coal. So that puts a

very nice tinge I guess to

anyone looking to invest in the

Australian coalfield. So that boosted the shares of Kuala

Lumpur companies yesterday. Can

we expect to see the upward

trend continue? I think so.

When you look at the price of

coal, it's got to be quite

supportive. It hasn't had a lot

of the moves that your others

like oil up 88%, your base

metals up 90%. How is st

trading at the moment and where

will it head? We've been as

high, in 2008, we were up

around that $192 a tonne. We've

come all the way back to 60.

Now we're just bouncing off

that, but the bounce hasn't

been as solid. So I actually

feel given the stimulus

packages we see continuing

particularly in China that we

will see prices start to graph

tight higher. I certainly feel

that that sector certainly

looks ripe to continue to move

higher. But are the concerns

in the coal mining sector ahead

of the Federal Government's carbon pollution reduction

scheme vote on Thursday? I

think there is always concern,

but what I do think is that we

need to see a proper plan

actually develop. The coalition

are looking to reject it. All

these concerns once again says

we're not a clear picture in

terms of how we're actually

going to take this forward. I

still feel we have to listen to

see what happens in Copenhagen,

so we can get direction on how

we should go, and I think at

the moment there's still that

cloud. So whilst that cloud is

there, I think there's still a

bit of uncertainty and yes I'd

be still concerned. Let's turn

to the price of oil. It's been

hit by a higher US dollar. It

has. It has actually bounced

from critical levels but even

as it said, the oil has been

hit by a stronger US dollar and

it looks to be stronger but the

other fundamentals to oil don't

suggest that oil can trail

onwards and upwards at the

present time. It creates this

picture we feel oil can have a

rest from its bull trend and have some form of

correction. This economic

optimism could mean a greater

demand for oil? It's meant to.

This is interesting, because

we've seen this greater

optimism. Over the last three,

four weeks we've seen the

equity markets push higher. But

crude oil hasn't. Crude hasn't

passed the last high we had

which was at 73.30 back in late

June. So really this optimism

hasn't led to higher prices in

oil. That's why we're seeing

prices stall around these

levels. I can't see oil pushing

onwards and upwards at the moment Jonathan Barratt,

thanks for the update. Good to

talk to you.

General Motors has launched

an unusual sales campaign in an

effort to shift gears back into

the black. The American auto

giant will allow customers to

buy cars and trucks through the

on-line auction site eBay.

Starting this week, Chevrolet,

Buick, GMC and Pontiacs will be

available for purchase on-line,

with more than 225 dealers

expected to participate in the

auction. GM's CEO says the new

venue will be used to increase sales as the companies try to

schink are the number of US

dealers by 42% by the end of

2010. The initial auction will

last until September 8. In

India, product launches and lower interest rates have

encouraged consumers to

purchase new cars. Official

figures show car sales jumped

by 31% in July from the seam

month a year ago. Commercial

vehicle sales also rose by

nearly 10% after months of declines. The maker of the

Nano, Tata Motors, says it has

received more than 200,000

orders for its low cost car

released in March. July was the sixth consecutive month that

car sales increased as new

products continued to come onto

the market analysts say the

trend is likely to continue. A

new study in the United States

shows that one third of

Americans take a nap during the

day and that includes people at

work. But the study also

indicates that far from being a

sackable offence, having a nap

could improve your

productivity. From Presidents

... to those trying to listen

to them ... there's not a

national stage important

enough, not a live television

audience big enough, to wake us

up! It doesn't come as a

surprise to me at all that a

third of Americans are napping

daily. We have a nation of

walking zombies. Naps get a bad

rap on TV. But research shows

that George Cotaanza has the

right idea. We will be much

more productive, much more

efficient and effective. At

this company, they enforce a

need-to-nap hall pee provides a

full y equipped nap room. For

those who don't have the luxury

of a napping nook ... YouTube

abounds with videos of workers

catching their Zs at their

desks ... even in bathrooms.

Wake up Homer! What,

what! You're fired. For

sleeping on the job. Assuming

you don't fall asleep at the

controls of a nuclear power

plant, a short snooze can go a

long way. Albert Einstein,

Winston Churchill and Thomas

Edison, all regular nappers. So

is the CFO. I'm definitely

recharged after. I look forward

to it. I tried it myself , in the interests of research of

course, hoping I too might

slumber my way to success. If

only! Now let's look at what's

making headlines around the

region. The 'Standard' reports

on the beginning of a court

case involving a squatter

family which has refused to

leave a plot of land worth

millions of dollars in the

heart of the cause way bay.

Financial Times reports on

Yungo's coal mines talks to buy

Felix Resources. And the 'Wall

Street Journal' says China

national petroleum company and

Sinook Limited are ready to pay

at least $17 billion for

Repsol's Argentine unit. 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