2009-02-13 Business and Finance News (vsx.com.au)

Gwalia ruling could hike up legal costs
Litigation costs could soar because of a High Court ruling that elevates the status of duped shareholders to unsecured creditors. ...
Fri 13th February 2009 - 10:22pm

AAPT losing customers and revenue
A $68 million writedown on Telecom Corporation of New Zealand's Australian subsidiary has contributed to the telco's 59 per cent drop in first half net profit. ...
Fri 13th February 2009 - 08:57pm

Fujitsu Laboratories Develops CMOS Transmitter IC for 40Gbps Optical Transmission Systems
Kawasaki- Japan and Sunnyvale- U.S.- Feb 13- 2009 - JCN Newswire - Fujitsu Laboratories Limited- Fujitsu Laboratories of America- Inc.- and Fujitsu Limited today announced the development of the worlds first 65 nanometer 65nm standard CMOS technology1-based transmitter IC serializer for 40 gigabits-per-second 40Gbps trunk-line optical transmission systems. ...
Fri 13th February 2009 - 08:33pm

NEC Positioned as a Principal Supplier of Technology for the Implementation of TDT in Spain
Tokyo- Feb 13- 2009 - JCN Newswire - NEC Corporation- one of the worlds leading providers of Internet- broadband network and enterprise business solutions- announced that its subsidiary NEC Iberica is positioned as one of the principal suppliers of technology for Abertis Telecoms digital broadcasting network. ...
Fri 13th February 2009 - 07:55pm

Murray River communities wait for trickle-down effect
Communities along the Murray River in South Australia are hoping water will begin to flow as freely as money following the passing of the Federal Governments economic stimulus package. ...
Fri 13th February 2009 - 07:41pm

G7 finance ministers gather for crisis meeting
ROME AFP - Group of Seven finance ministers and central bank chiefs were to begin meeting in Rome late Friday to discuss the global financial crisis amid stern warnings against protectionism. ...
Fri 13th February 2009 - 06:58pm

Axa expected to report loss
Investors will be watching closely whether falling asset values cause Axa Asia-Pacific to post a net loss when it reports its full year results on February 17. ...
Fri 13th February 2009 - 06:58pm

Flooding stops CopperCo mine production
Mining at CopperCo Ltd's Lady Annie copper operation in Queensland's Mt Isa region has been suspended due to flooding. ...
Fri 13th February 2009 - 06:56pm

BlueScope Steel raises $113m
Australia's largest steelmaker BlueScope Steel Ltd has raised $113 million from a share purchase plan after falling short of its maximum acceptance level. ...
Fri 13th February 2009 - 06:47pm

Coke profit results 'ahead of forecasts'
Coca-Cola Amatil CCA Ltd's annual profit figures are ahead of consensus and more solid results can be expected- analysts say. ...
Fri 13th February 2009 - 06:45pm

London Stock Exchange appoints new CEO
LONDON AFP - The London Stock Exchange on Friday said that Xavier Rolet- a former senior executive at collapsed US bank Lehman Brothers- will replace Clara Furse as chief executive in May. ...
Fri 13th February 2009 - 06:37pm

Rail strike cancelled for next week
Strike action that would have seriously disrupted train services in south-east Queensland has been called off. ...
Fri 13th February 2009 - 06:30pm

Rail strike cancelled for next week
Two days of rail strikes planned for Brisbane next week have been called off. ...
Fri 13th February 2009 - 06:28pm

ANZ surge bolsters local market
There has been a rise on the Australian share market after a surge by ANZ. ...
Fri 13th February 2009 - 06:21pm

Rail strike cancelled for next week
Unions representing railway workers in Queensland have cancelled two days of strike action planned for next week. ...
Fri 13th February 2009 - 06:15pm

Australian Senate passes stimulus package
SYDNEY AFP - Australias parliament narrowly passed a 42 billion dollar 28 billion US stimulus package Friday in a bid to stave off recession in the face of the global economic crisis. ...
Fri 13th February 2009 - 05:49pm

Westpac economist backs stimulus- calls for another
Westpacs chief economist Bill Evans says he supports the Governments stimulus package and has even called for another one later this year. ...
Fri 13th February 2009 - 05:49pm

Australia boosts economic ties with Asia
Australia has enjoyed growing economic ties with its Asian neighbours since 1990- although this has yet to translate into increased two-way investment. ...
Fri 13th February 2009 - 05:38pm

Media sector earnings tipped to fall 13
Media companies are expected to report uninspiring results in February's profit reporting season- with earnings down 13 per cent on average- analysts say. ...
Fri 13th February 2009 - 05:34pm

Asian Markets Overview of February 13
Sydney- Australia- Feb 13- 2009 - ABN Newswire - Asian markets fell yesterday as investors remained sceptical and worried the deteriorating economy would not receive immediate help from the US stimulus plan. Tokyo stocks dropped 3- led mostly by banks and exporters- as trading resumed after a holiday. Hong Kongs Hang Seng Index fell 2.3- while Shanghai Composite lost 0.6. ...
Fri 13th February 2009 - 05:27pm

Protectionism absolute evil- says Japanese minister
TOKYO AFP - Japanese Finance Minister Shoichi Nakagawa lashed out Friday at protectionism- calling it an -amp quotabsolute evil -amp quot ahead of a meeting of the Group of Seven economic powers. ...
Fri 13th February 2009 - 05:26pm

Stockland H1 result 'disappointing'
Stockland Group's first half profit was lower than expected and further falls are anticipated- analysts say. ...
Fri 13th February 2009 - 05:24pm

Retail bodies divided on stimulus
Australia's big department stores and smaller retailers are divided on how the federal government should hand out its $42 billion fiscal stimulus package. ...
Fri 13th February 2009 - 05:15pm

AMP expects profit of $800m for 2008
Financial services provider AMP expects its annual underlying profit for 2008 to be around $800 million- compared to $882 million in the 2007 financial year. ...
Fri 13th February 2009 - 05:14pm

Australia shares up 1.3 to 1-mth high ANZ jumps
SYDNEY- Feb 13 - Australian stocks rose 1.3 percent on Friday to a near one-month closing high- led up by Australia -amp amp New Zealand Banking Group Ltd ANZ which jumped 9 percent after quashing speculation about a possible capital raising. ...
Fri 13th February 2009 - 05:14pm

Rio confident of Chinalco deal
Rio Tinto is confident its landmark $US19.5b $A29.87b alliance with China's Chinalco will clear all hurdles- amid a mixed response to the deal from investors. ...
Fri 13th February 2009 - 05:10pm

Newcrest Mining lifts profit to $154m
Newcrest Mining lifted first half profit to $154 million from a loss in the prior corresponding period- and said it was in a strong position in a weak economy. ...
Fri 13th February 2009 - 04:54pm

HIA says stimulus will boost jobs- confidence
The Housing Industry Association HIA says the Governments $42 billion stimulus package will deliver a boost to jobs and confidence in the sector. ...
Fri 13th February 2009 - 04:50pm

OZ Minerals to post $2.8b in write-downs
Ailing diversified miner OZ Minerals has warned of writedowns between $2.3 billion and $2.8 billion in its full year accounts due to falls in commodity prices. ...
Fri 13th February 2009 - 04:37pm

Stockland H1 result 'disappointing'
Stockland Group's first half profit was lower than expected and further falls are anticipated- analysts say. ...
Fri 13th February 2009 - 04:37pm

Australia shares up 1.3 pct to near 1-month high
SYDNEY- Feb 13 - Australian stocks rose 1.3 percent on Friday to a near one-month closing high- as Australia and New Zealand Banking Group Ltd ANZ ANZ jumped after quashing speculation about a possible capital raising. ...
Fri 13th February 2009 - 04:24pm

Nick Scali still committed to new stores
Nick Scali Ltd says its remains committed to opening new stores despite difficult trading conditions and a 45 per cent drop in half year profit. ...
Fri 13th February 2009 - 04:24pm

Firms 'must nurture staff for long term'
Employers must keep nurturing their star employees for the long term and not focus solely on the current downturn- a staff consultant says. ...
Fri 13th February 2009 - 04:10pm

$320m buys 20 new passenger trains for SE Qld
The State Government will build 20 new passenger trains to ease congestion in south-east Queensland. ...
Fri 13th February 2009 - 03:43pm

Job-seeking grads well placed- experts
New graduates should be proactive and exercise patience when looking for a job amid a weakening labour market- experts say. ...
Fri 13th February 2009 - 03:41pm

Mantle Mining Corporation Limited ASX-MNM Targets Major Increase in Gold And Silver Resource In North Queensland
Melbourne- Australia- Feb 13- 2009 - ABN Newswire - Mantle Mining Corporation Limited ASX-MNM is pleased to report that it has recently defined a number of parallel major shears containing high grade Gold and Silver values adjacent to existing drill indicated shear-hosted gold mineralisation at its 100 owned Granite Castle Gold Project in north Queensland. ...
Fri 13th February 2009 - 03:30pm

New restrictions to safeguard rock lobster industry
The Minister for Fisheries- Norman Moore- has announced a further round of fishing restrictions for the rock lobster industry. ...
Fri 13th February 2009 - 02:59pm

U.S. oil rises above $34 on stocks rally-govt action
PERTH- Feb 13 - U.S. oil prices rose above $34 a barrel on Friday- snapping a five-day losing streak- as a late rally in U.S. stocks on news that the U.S. government was working on a mortgage plan for troubled homeowners helped lift sentiment. ...
Fri 13th February 2009 - 02:57pm

New restrictions to safeguard rock lobster industy
The Minister for Fisheries- Norman Moore- has announced a further round of fishing restrictions for the rock lobster industry. ...
Fri 13th February 2009 - 02:48pm

Labor debt train on its way- Turnbull
The passing of the Governments $42 billion economic package will plunge the country into unprecedented debt- Opposition Leader Malcolm Turnbull says. ...
Fri 13th February 2009 - 02:36pm

Small businesses slam stimulus package delay
Small businesses say they have lost hundreds of millions of dollars in revenue because of the delay in approving the Federal Governments stimulus package. ...
Fri 13th February 2009 - 02:22pm

Rio shares fall as market mulls deal
Rio Tinto Ltd shares fell as the market weighed the pros and cons of its landmark $US19.5 billion $A29.87b alliance with Chinese resources giant Chinalco. ...
Fri 13th February 2009 - 01:55pm

Southern Uranium Resources ASX-SNU Encouraging New Jungle Dam Drill Project Assays
Brisbane- Australia- Feb 13- 2009 - ABN Newswire - Southern Uranium Limited ASX-SNU has received encouraging assays for a small aircore drill programme undertaken last December at the Jungle Dam project in South Australia. The project area lies within SNUs 100 percent-owned tenement EL 3479 and was selected as a priority target area within the Moonta corridor of emerging iron oxide-related- multi-commodity uranium prospects. ...
Fri 13th February 2009 - 01:51pm

IMFs Strauss Kahn warns of back door protectionism
WASHINGTON AFP - IMF Managing Director Dominique Strauss-Kahn warned governments against protectionism -amp quotthrough the back door -amp quot on Thursday- as they seek to prime their economies in the midst of the global economic downturn. ...
Fri 13th February 2009 - 01:50pm

Consumer group blasts small retailers
Australia's peak consumer group blasted an umbrella body of smaller retailers that has urged the government to replace stimulus package handouts with vouchers. ...
Fri 13th February 2009 - 01:49pm

Australian Market Report of February 13- Concerning US and Australias Stimulus Plans
Sydney- Australia- Feb 13- 2009 - ABN Newswire - Overnight the US stocks rebounded from an early sell-off and closed slightly higher as the US government is mulling direct assistance to homebuyers who are facing mortgage foreclosures.Yesterday the Aussie market ended higher amid expectations debt-laden Rio Tinto would announce the A $30 billion deal with Chinese steelmaker Chinalco. The benchmark S -amp ampP-ASX200 was up 39.9 points- or 1. ...
Fri 13th February 2009 - 01:34pm

Australian Senate passes stimulus package
SYDNEY AFP - Australias Senate passed a 42 billion Australian dollar 28 billion US stimulus package Friday after an key independent senator reversed his opposition to the government plan. ...
Fri 13th February 2009 - 01:28pm

Stimulus package passes Senate
The Senate has passed the Governments $42 billion economic stimulus package- with Independent Senator Nick Xenophon changing his vote after securing $900 million for the Murray-Darling Basin. ...
Fri 13th February 2009 - 01:10pm

Rios Chinese sales pitch not a home run
It all depends on the Federal Government approving the deal- but Rio Tinto and its Chinese partner Chinalco are promoting Rios asset sale and bonds issue as a way of saving 2-000 Australian jobs and boosting the flagging economy. ...
Fri 13th February 2009 - 12:46pm

AMP predicts profit drop
AMP says it is expecting to declare a shareholder dividend below market forecasts and is predicting a fall in its net profit for 2008. ...
Fri 13th February 2009 - 12:45pm

AAPT losing customers and earnings
Telecom Corporation of New Zealand Ltd has downgraded its earnings guidance for its Australian subsidiary AAPT as it loses customers. ...
Fri 13th February 2009 - 12:41pm

Aussie dlr rises on stimulus approval bonds fall
AUSTRALIAN CREDIT-FOREXSNAPSHOT FOREIGN EXCHANGE AT 0127 GMTagainst previous Sydney close AUD 0.6560-640.6584-87 AUDNZDR1.2555-751.2486-504 AUDJPYR 59.51-56 5 ...
Fri 13th February 2009 - 12:40pm

Horror accident- Rail giant ordered to improve safety
Australias biggest rail construction firm has been ordered to lift its safety standards after a workers arm was partially severed in an accident in the New South Wales Hunter Valley. ...
Fri 13th February 2009 - 12:36pm

Horror accident- Rail giant ordered to improve safety
Australias biggest rail construction and maintenance firm has been urged to lift its safety standards after a workers arm was partially severed in an accident in the New South Wales Hunter Valley. ...
Fri 13th February 2009 - 12:35pm

Rural lifestyle in jeopardy- residents
Residents living near the site where Inpex wants to build an accommodation block for 2000 workers- fear their objections will be overlooked by politicians. ...
Fri 13th February 2009 - 12:25pm

Biota Holdings Limited ASX-BTA Revised Relenza Royalty For December 2008 Quarter
Melbourne- Australia- Feb 13- 2009 - ABN Newswire - Biota Holdings Limited ASX-BTAPINK-BTAHY today reported that it had received revised advice from GlaxoSmithKline GSK regarding Relenza sales for the December 2008 quarter. The revised sales were A $27.1 million US $20.8 million and indicative royalties were A $1.9 million US $1.46 million. This revision represents an additional A $0.44 million in royalties to Biota. ...
Fri 13th February 2009 - 12:15pm

Xenophon strikes deal to pass stimulus plan
Independent Senator Nick Xenophon has agreed to vote for the Governments $42 billion economic stimulus package after securing just under $1 billion in funds for the Murray-Darling Basin. ...
Fri 13th February 2009 - 11:54am

Oz Minerals set for asset write-down
Financially-troubled miner Oz Minerals says it expects to write-down the value of its assets by up to $2.8 billion. ...
Fri 13th February 2009 - 11:50am

Australia shares up 0.3 ANZ up- BHP- Rio down
MELBOURNE- Feb 13 - Australian stocks rose 0.3 percent on Friday- with a rise in Australia -amp amp New Zealand Banking Group ANZ offsetting falls in big miners such as Rio Tinto RIO RIO.L amid caution ahead of a spate of profit results. ...
Fri 13th February 2009 - 11:47am

Best job in the world applications hit 15-000
Tourism Queensland says it is expecting to be flooded with applications for its best job in the world campaign in the next week- with applications closing next Sunday. ...
Fri 13th February 2009 - 11:37am

Govt calls for regional submissions into credit crunch
The Federal Governments calling for public submissions on the impact of the global financial crisis on regional Australians. ...
Fri 13th February 2009 - 11:34am

Market opens higher
The Australian sharemarket has shrugged off Wall Streets losses to open higher this morning. ...
Fri 13th February 2009 - 10:44am

Aussie jumps on US home loan plan stimulus a drag
SYDNEY- Feb 13 - The Australian dollar edged higher on Friday as hopes the U.S. government may subsidise mortgage payments suddenly fired investors risk appetites- but possible delays in Australias stimulus plan may erode Aussies gains. ...
Fri 13th February 2009 - 10:40am

Australia shares up 0.1 pct earnings worry weighs
MELBOURNE- Feb 13 - Australian stocks rose 0.1 percent on Friday- helped by a late recovery of losses on Wall Street- though uncertainty ahead of a spate of local company profit results in coming days kept gains in check. ...
Fri 13th February 2009 - 10:21am

Galaxy Resources Limited ASX-GXY Emerging Lithium Producer Appoints Noahs Rule As Corporate Advisor
Perth- Australia- Feb 13- 2009 - ABN Newswire - Galaxy Resources Limited ASX-GXY has appointed risk advisory group- Noahs Rule- to assist in the next stage of project development and corporate debt raising and financial structuring.Noahs Rules debt advisory team will advise Galaxy through the capital raising process for the Mt Cattlin Lithium-Tantalum project. ...
Fri 13th February 2009 - 09:58am

Rio-Chinalco deal will save 2-000 jobs
The mining company Rio Tinto has been accused of acting out of desperation in striking a $30 billion deal with the Chinese company Chinalco. ...
Fri 13th February 2009 - 09:56am

Xenophon wants sensible compromise on stimulus
The Government is yet to reach a deal with key Independent Senator Nick Xenophon over its $42 billion economic stimulus package. ...
Fri 13th February 2009 - 09:22am

Joyce wants Rio-Chinalco deal blocked
Nationals Senator Barnaby Joyce says the Federal Government should block Rio Tintos multi-billion dollar deal with the Chinese-owned Chinalco company. ...
Fri 13th February 2009 - 09:12am

Debt- Good Or Bad
Budget deficits and public debt are on the rise in most countries. Fortunately Australia is in a better position than most countries to increase public borrowing.Fears that soaring budget deficits will simply push up inflation and bond yields are likely to be misplaced in the short term. Increased public borrowing will be offset by increased private sector saving-reduced private borrowing as consumption and investment weaken.Many fret that the rise in budget deficits and public debt now underway in most countries- including Australia- will simply push up inflation and bond yields- and hence private sector borrowing rates.Partly- reflecting these concerns- ten year bond yields have risen from their lows early this year - from 2 to 2.8 in the US- from 3 to 3.9 in the UK and from 3.8 to 4.3 in Australia.The AMPs chief economist- Dr Shane Oliver says the key will be for governments to wind back their borrowing and debt as economic recovery kicks in.Rising budget deficits and public debtBudget deficits are being pushed up by a combination of slowing economic growth which reduces government revenue and boosts spending- governments buying private sector securities and moves to increase spending and cut taxes to actively boost growth.Most major countries and regions will see their budget deficits increase sharply over the next few years.This will push budget deficits in the US and UK above the extremes of the last 20 years in relation to GDP.However- it should be noted the US budget deficit reached almost 30 of GDP during WW2.The blow-out in public deficits will result in a sharp rise in both gross and total public sector debt and net debt which nets off public holdings of securities such as foreign exchange reserves or holdings of private sector securities.The increase in gross debt will be larger than net debt because some of the public sector borrowing is being used to buy private sector securities in an effort to stabilise the financial system.Given the severity of the downturn- net public debt in the US could be pushed up by 20 to 30 of GDP over the next few years. Similar increases are possible in Europe and Japan.Such increases would push public debt levels above the extremes of the past 20 years.Its clear that Australia is starting from a reasonably favourable position having no net public debt.The Federal Governments budget deficit projections and State budget deficits could push net public debt up to around 10 of GDP over the next few years.However- this would still be well below the 1995 peak of 26 of GDP and would also be well below other OECD countries which are likely to have net public debt averaging around 65 of GDP in a few years time.Will the deficit financing just push up bond yieldsEvery time there is a recession and public budgets shift into large deficits there is concern it will boost inflation and the increased supply of bonds will boost bond yields.However- expanding budget deficits dont cause inflation or higher bond yields in economic downturns because they are merely offsetting an increase in private savings as private consumption and investment are slashed.The Japanese experience in the 1990s was a classic example of this - the budget deficit and public debt blew out- but inflation turned into deflation and bond yields fell below 2.The same is evident in Australia- as indicated in the next chart- which shows that bond yields fell during the early 1980s and early 1990s recessions despite a blow-out in the budget deficit at the time.The next year or so is unlikely to be an exception.The impact of the global economic slump will more than offset bond issuance in determining bond yields.Firstly- the period ahead is likely to see a sharp fall in underlying inflation rates- both globally and in Australia- as the recession leads to excess capacity.This in turn combines with weak raw material prices to put downwards pressure on inflation.For example- the rise in US unemployment is pointing to a very sharp fall in US inflation as indicated in the next chart.Similarly- if our predictions are correct and the unemployment rate in Australia rises to 7 by year end- then this will also drive a sharp fall in underlying inflation locally.Falling inflation will hold down inflationary expectations and ensure that short term interest rates remain low for a lengthy period. Both factors will ensure that bond yields stay low despite increased public borrowing.Secondly- increased private sector savings will more than offset the increase in public sector borrowing.For example- the US budget deficit looks like being boosted by 5 of GDP over the next year.However- household savings is likely to rise- possibly by around 5 of GDP- and its likely that borrowing in the corporate sector will fall by around 3 of GDP.As such- increased private sector savings will likely offset increased public sector borrowing ensuring there will be plenty of funds available to buy government bonds.Likewise in Australia- an increase in public borrowing equivalent to 3 or 4 of GDP will be offset by increased household savings which may amount to 4 of GDP and reduced corporate borrowing as business investment falls.This increase in private sector savings will likely mean that there will be plenty of funding for an increase in public borrowing.In fact we will have the perverse situation over the year ahead that households will save a big chunk of the payments they receive from the Government which will ultimately be recycled into buying government bonds.This also means that there will be enough domestic sources of increased savings to fund public sector borrowing without having to worry about relying on increased offshore borrowing- including from China.So for these reasons we are not particularly concerned about rising budget deficits and public debt pushing up inflation and bond yields.In fact- the more likely scenario is that bond yields will remain low and may even revisit recent lows i.e. 2 or less in the US and sub 4 in Australia if at any time over the next few months there is renewed doubt regarding the timing of the economic recovery.QualificationsThere are two qualifications to this. Firstly- the provision of government guarantees over banks is blurring the distinction between public and private debt.Given the higher yields- government guaranteed bank debt may be more attractive than public debt.This- plus the fact that investment grade corporate debt is still trading on a yield spread consistent with a depression- suggests that corporate debt may be a more attractive investment than government debt in this environment in most scenarios unless of course the economic environment takes a renewed turn for the worst.These considerations will limit the downside in government bond yields.Secondly- while there is no reason to be concerned about higher bond yields and inflation flowing from increased budget deficits in the short term- the situation could change quickly once economic growth and private sector borrowing recovers.In a few years time it will be critical for governments to wind back their borrowing.If the history of trying to reduce public sector borrowing in the past is any guide- this could prove to be a challenge as economic uncertainty will linger and government spending becomes sticky.Concluding commentsThe recent sell-off in bonds on the back of supply worries is likely to prove temporary.Bond yields are likely to fall back over the next six months.Worries about expanding budget deficits will be more than offset by the impact of continuing low short-term interest rates in the face of falling inflation and increased private sector savings which will create a natural demand for bonds.It will be critical though to wind back the blow-out in public borrowing when recovery arrives and private sector borrowing picks up again- otherwise much higher bond yields will result.However- with government bond yields so low at around 4 or less- its hard to get excited about them as a long term investment. -amp 160 ...
Fri 13th February 2009 - 08:58am

Australia shares seen buoyed by Wall Street bounce
March share price index SPI futures YAPcm1 rose 20 points or 0.6 percent to settle at 3-491.0- a 23.3-point discount to the underlying benchmark S -amp ampP-ASX 200 indexs JO Thursday close of 3-514.3. ...
Fri 13th February 2009 - 08:46am

Rio Sells Out
Rio Tinto is preparing to sell some of its birthright to Chinese state-owned group- Chinalco in an effort to stave off hard decisions on debt and asset sales it needs to make.The company will raise $US19.5 billion from the deal- enough to halve the size of the debt taken on in the ill-advised purchase of Alcan in 2007 as it tried to make itself too expensive for BHP Billiton.It didnt work then BHP bid- then withdrew after the financial crunch made debt a no-no especially the $US37 billion that Rio had on its books.The Chinalco deal took attention away from Rios 2008 full year profit- which was a bit better than the market expected.Rio reported a 38 rise in underlying profit of $US10.3 billion for the calendar year 2008- beating market expectations of around $US9.8 billion.However- net profit tumbled 50 to $US3.7 billion- hit by asset impairment charges of $US8.4 billion- the majority of write-downs relating to the groups aluminium business.These were partly offset by asset sales worth $US1.5 billion. Further assets sales happened after balance date last weekRio declared a final dividend of 68 US cents- taking total dividends for the year to $US1.36- unchanged from 2007. -amp 160Given the outlook for commodities this year- that level of payout is unsustainable.Rio Tintos chairman Paul Skinner said in a statement -amp quotAlthough the condition of the global economy and of demand for our products deteriorated very rapidly in the fourth quarter of 2008- the Group nevertheless registered record underlying earnings of $10.3 billion for the year- a rise of 38 per cent on the prior year.Tom Albanese- Rio Tintos chief executive said in the same statement- -amp quotThese record results demonstrate the outstanding value that Rio Tintos assets and long term investments generate when markets are buoyant- with cash flow from operations in excess of $20 billion in 2008. -amp quotAs a consequence- the Group has been able to reduce net debt by $6.5 billion during the year from free cash flow and divestment proceeds. -amp quotGiven the current uncertain economic conditions and the unprecedented rate of deterioration in our markets and prices- we are now focusing our efforts on maximising and conserving cash generation and paying down debt. -amp quotIn December- as part of our commitment to reduce net debt by $10 billion in 2009- we announced that capital expenditure for 2009 will be reduced from over $9 billion to $4 billion and that controllable operating costs will be reduced by at least $2.5 billion per annum in 2010- to include a global headcount reduction totalling 14-000 contractor and employee roles worldwide. -amp quotThat cut in debt was to replace attempts to sell around $US10 billion in assets- Rio couldnt find buyers as the global financial crunch closed in- shutting off credit markets and driving down commodity prices- and share prices alike.A huge- discounted rights issue was always a possibility- but never entertained- a move that forced chairman designate- Jim Leng- to walk three weeks after he had been named to replace Paul Skinner.It seems that rather than take big losses and possible loss of their positions- members of the board and management always wanted to sell to Chinalco- which snapped up 9 of Rios share in a dawn raid in London just over 12 months ago. Chinalco is looking at huge losses on that stake- but because its owned by the Chinese Government. It has access to a lot of money.There is strategic sense for China to buy shares in mines like Escondida- Hamersley and Weipa- but the latter two mines are the foundation stones of Rios strength through the Australian arm which is a modern version of the old CRA.Australian Government approval will be needed- despite claims the deal will be structured to get around those requirements. -amp 160At nearly $20 billion- this will be one of the largest deals done by China in a Western company. A Chinese bank is about to pay $US20 billion for the life business of the stricken US insurer- AIG.For that reason- it will have to be sensitive to local feelings The Chinese Government knows all about chauvinism.The Chinese Government will want the Australian Government to approve these deals and Chile in the case of Escondida because not to have them- or to be seen being -amp quotcreative financially would damage the standing of Rio- Chinalco and the Chinese Government.But the main problem is the absurdity of Rio inviting in a major consumer of some of its products bauxite-alumina and aluminium and a company owned by a Government which controls other major buyers of Rio and Australian commodities in the steel and copper industries.In introduces an unwelcome intruder into the pricing process- Rio will never be able to shake off suspicion that it is doing price and other deals to suit their -amp quotowner -amp quot if those arrangements are seen to advantage China or discriminate against Australia or other companies and companies from other countries- such as Vale- the big Brazilian iron ore exporter.BHP and Rio will no longer be able to negotiate from a separate- but common front.Rio claimed there would be good governance- but in practice its a case of whoever is paying- calls the tune.Why would BHP or any other company share information with Rio on pricing etc when Chinalco will have a board member and the Rio board would be discussing contract pricing and other matters every meetingThe Financial Times Lex column wrote that Rio was making a big mistake because it was adopting a strategic solution to a financial problem. It said Rio should be raising money from shareholders.Chairman- Skinner and the board and CEO- Tom Albanese have not owned up and accepted responsibility for the Alcan purchase and the way it as 100 financed with debt.They didnt go to the market for capital when they could have because they were scared of the reaction from big investors with BHP lurking with its rumoured bid.Rio could have raised a lot more money when the share price was much higher and not diluted existing holders. It would have put the acid on BHP- but it would have made Alcan a more comfortable deal in financial terms but still expensive.Reports from London havent they all been there in the BHP Rio Story suggest that BHP might be thinking of a counter bid for Rio.BHP is also reported to have been lobbying the Federal Government against the Chinalco deal- arguing that it is not in Australias best interests.That might be so- but its a bit rich for BHP to grabbing the cloak of nationalism when it did it best to avoid it and ignore such worries when it was hunting Rio in the first place.One media outlet summed up the deal in quoting a Goldman Sachs JBWere analyst- Neil Goodwill- who said this week that -amp quota sale for cash or equity in Rios current state of desperation has all the hallmarks of a value-destructive transaction -amp quot.Chinalco will receive one seat on Rios board in return for its investment and have the right to appoint another at a later date.The deal will require approval from Rios shareholders.A majority of Rio shareholders - 23 of which hold shares in the Australian listing and 77 of which hold shares in the UK listing - will have to approve the transaction at meetings in May.Thats if the Foreign Investment Review Board gives the green light to the deal- which Rio hopes to tie up by July 31.But this could be complicated by the Federal Governments move to tighten foreign-ownership laws.Federal Treasurer Wayne Swan said yesterday the Australian government will treat convertible debt as if it were equity. -amp 160This change is effective immediately and could be a major complication for Rio as its a significant change in policy by Canberra- seemingly to meet the expected terms of the Rio-Chinalco deal..Rio has to solve some major problems of its own making- $US9 billion of bank debt taken on to pay for the Alcan acquisition due in October- and a further $US10 billion next year. Chinalcos cash will fix those headaches.Under the terms of the deal- Chinalco will increase its stake in Rio to 18 from 9.It will buy $7.2 billion in convertible bonds that will convert into Rio shares at a later date.This will pay a coupon of 9 for the stake in the Australian arm and 9.5 for the stake in the UK arm and mature in seven years.If converted- the subordinated convertible bonds would increase Chinalcos current shareholding to 19.0 in Rio Tinto plc and 14.9 in Rio Tinto Limited- equivalent to an 18.0 interest in the Rio Tinto Group.Rio said the deal -amp quotraises significant funds at a time when financial markets are distressed- materially reducing Rio Tintos indebtedness- strengthening its balance sheet and increasing its flexibility to pursue attractive investment opportunities throughout the cycle. -amp quotChinalco will also invest $US12.3 billion in three strategic partnerships with Rio across its copper- aluminum and iron ore divisions- specifically minority stakes in a total of nine mines around the world- Weipa Yarwun Boyne -amp 38 GPS Escondida KUC Grasberg la Granja and Hamersley Iron. -amp 160 ...
Fri 13th February 2009 - 08:12am

Economy- Jobs Picture Souring
The employment outlook is definitely souring- despite the confusion from the latest labor force numbers from the Australian Bureau of Statistics.The number of jobs rose 1200 tiny- but still a rise- the number of unemployed jumped- as did the number of full time jobs- which offset a fall in part time work.The sharp rise in the unemployment rate to 4.8 last month from 4.5 in December gives another clue. It was the biggest rise for some time and took the rate back to mid 2006.Consumers seem gloomy about the employment outlook- according to another survey from Westpac and the Melbourne Institute. Employment expectations are at a 26 year low.But there has been a sharper- 0.7 rise from January- 2008- when the unemployment rate was 4.1.Look back to the way the number of unemployed has risen in the 12 months from January 2008. The slowing pace of economic activity has definitely pushed the number of jobless up significantly over the year. Unemployment has risen by around 84-000 people from January last year to last month- from 456-100 to 540- 200 last month.That- according to the ABS- was a rise of 18.4 from January last year- to last month.Growth in the labour force has slowed from well over 2.5 to just 0.9.Australia needs growth of around 2.3 a year to stop unemployment from rising.Federal Treasury last week said that unemployment was expected to grow by around 300-000 over the next 18 months and peak around 7. The Reserve Bank expects the number of jobless to increase -amp quotmaterially -amp quot over the next year or so.Looking at the jobless numbers over the 12 months gives a better understanding of the way the economic slowdown is affecting employment- despite what again appears a skewed result from the ABSs latest figures using a smaller sample.The ABS said that overall employment -amp 160last month -amp quotincreased by 1-200 to 10-742-100. Full-time employment increased by 33-700 to 7-670-700 and part-time employment decreased by 32-600 to 3-071-400.Unemployment -amp quotincreased by 36-800 to 540-200. The number of persons looking for full-time work increased by 29-900 to 381-300 and the number of persons looking for part-time work increased by 6-900 to 158-800 -amp quotThe participation rate rose to 65.5 in January- up 1 as more people seemingly looked for work. This doesnt quite sit properly with yesterdays consumer confidence figures which fell for a second month- and remain negative.With the 0.3 rise to 4.8 in the unemployment rate- the male rate was higher 4.9- than females on 4.7. More females were employed in January- compared to January- 2008 and slightly fewer men were in employment.The market had been expecting a loss of jobs in January- most forecasts had centred a fall in total -amp 160employment of around 18-000- a jobless rate of 4.7 and a participation rate of 64.9. Inexplicably the ABS says 1-200 jobs were added.Still even at 4.8- the Australian jobless rate is still significantly less than the 7.6 in the US. Japans rate has started surging- hitting 4.4 in December- from 3.9 the month before. Rates in Europe are well over 7 and 8- In Spain its 14.In Britain this week- the jobless rate hit 6.3- or 1.97 million in December. The number was expected to top the 2 million mark in January. The Bank of England said the economy was in -amp quotdeep recession -amp quot and would contract by 4 in the early months of this year.But Australian housing has started perking up- despite the gloominess in the consumer surveys and among business.The National Australia Bank said this week the gloominess of business worsened last month and is now at record lows.Yesterday it provided a detailed look at the December quarter- and there was little improvement.The survey found that confidence in business is at its worst since the onset of the 1990 recession and will deteriorate even more as Easter approaches in April.Business confidence plunged to a record-low in the December quarter and has now worsened for four consecutive quarters- since hitting a peak in late 2007- according to the NAB yesterday. -amp quotThis represents the largest annual fall in business conditions since entering the 1990-91 recession- -amp quot the report said.A plunge in the employment measure weighed down business conditions- with profits and trading also falling.The surveys business conditions measure fell 12 points in the December quarter to minus-16- the lowest reading since September 1992 when Australia was emerging from the last recession. -amp quotBusinesses expect conditions to slow significantly further in the March quarter of 2009- -amp quot the report said.NABs business confidence measure dropped by 24 points to minus-31 in the three months to December- the lowest reading since the series began in 1989. -amp 160 ...
Fri 13th February 2009 - 08:10am

Rio Tinto shares fall over Chinalco deal
Shares in Rio Tinto fell in London after the Anglo-Australian miner announced a landmark $US19.5 billion $A29b deal with major shareholder Chinalco. ...
Fri 13th February 2009 - 07:58am

Euro forecasters expect lower growth
Forecasters expect the eurozone economy to shrink by 1.7 per cent this year but grow by 0.6 per cent in 2010- a poll by the European Central Bank showed. ...
Fri 13th February 2009 - 07:55am

New York oil price slides towards 35 dollars
LONDON AFP - The price of New York crude oil fell toward 35 dollars a barrel on Thursday in a market plagued by weak energy demand reflected in new US data that showed surging crude stockpiles. ...
Fri 13th February 2009 - 07:54am

US retail sales in unexpected jump
There has been a slight glimmer of economic hope in the US- with an unexpected jump in retail sales. ...
Fri 13th February 2009 - 07:27am

U.S. crude drops 5.5 pct on supply glut
NEW YORK- Feb 12 - U.S. oil prices fell 5.5 percent on Thursday to settle at the lowest point in nearly two months- dragged down by swelling crude stocks in the United States and concerns over the health of the global economy. ...
Fri 13th February 2009 - 07:16am

Electronics giant Pioneer slashes 10-000 jobs
Japanese electronics giant Pioneer has announced it will cut 10-000 jobs worldwide and get out of the television business. ...
Fri 13th February 2009 - 06:49am

ABB profit falls as emerging markets decline
ZURICH AFP - Engineering giant ABB said Thursday its annual net profit slipped 17 percent in 2008 to 3.12 billion dollars 2.4 billion euros after a sharp drop in big orders from emerging markets in the fourth quarter. ...
Fri 13th February 2009 - 06:28am

British authorities launch probe into AIG unit
LONDON AFP - Britains Serious Fraud Office said Thursday it had launched an investigation into operations at a British subsidiary of US insurance giant American International Group AIG. ...
Fri 13th February 2009 - 06:10am

U.S. crude drops below $35 on high stocks
NEW YORK- Feb 12 - U.S. oil futures fell to a three-week low below $35 a barrel on Thursday- dragged down by an overhang of crude oil stocks in the United States and concerns over the health of the global economy. ...
Fri 13th February 2009 - 05:59am

Rio-Chinalco deal will forge China ties- CEO
Rio Tinto says the deal with Chinese aluminium producer Chinalco to invest $30 billion in the mining company is good for the Australian economy and will safeguard thousands of jobs. ...
Fri 13th February 2009 - 04:43am

Rio-Chinalco deal will forge China ties- CEO
Mining giant Rio Tintos chief executive says a multi-billion-dollar deal with Chinalco will strengthen ties with China and save jobs. ...
Fri 13th February 2009 - 04:13am

Irish economy grounded by falling prices- job cuts
DUBLIN AFP - Irelands once-proud Celtic Tiger economy- already mired in a recession- was rocked on Thursday by news of falling prices and heavy job cuts. ...
Fri 13th February 2009 - 03:56am

Spain officially in recession
MADRID AFP - Spain- Europes fifth-biggest economy- entered recession in the fourth quarter for the first time in 15 years driven down by the collapse of a real estate boom- official data showed on Thursday. ...
Fri 13th February 2009 - 03:43am

Stimulus package back in Senate
The fate of the Federal Governments economic stimulus plan hangs in the balance today- and the Government is putting the blame squarely on the Opposition. ...
Fri 13th February 2009 - 03:32am

Euro forecasters expect lower growth- inflation
FRANKFURT AFP - Forecasters expect the eurozone economy to shrink by 1. ...
Fri 13th February 2009 - 03:25am

General Motors offers buyouts to hourly workers
NEW YORK AFP - General Motors said Thursday it was offering voluntary buyouts or early retirement packages to all its hourly production workers as part of the troubled automakers overhaul. ...
Fri 13th February 2009 - 03:15am

Profit- trade drop for agribusiness
Agribusiness conditions declined in the last three months of 2008 and are likely to fall further- new figures show. ...
Fri 13th February 2009 - 02:33am

U.S. oil futures fall below $35 on high stocks
LONDON- Feb 12 - Front-month U.S. oil futures fell below $35 a barrel on Thursday- dragged down by an overhang of crude oil stocks in the United States and also depressed by concerns over the health of the global economy. ...
Fri 13th February 2009 - 02:13am

US retail sales rebound 1 in January
WASHINGTON AFP - US retail sales rebounded unexpectedly in January-rising 1. ...
Fri 13th February 2009 - 12:48am

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