The benchmark S&P/ASX 200 index closed down 36 points, or 0.79 per cent, at 4537.2 points, while the broader All Ordinaries index fell 34.7 points, or 0.75 per cent, to 4578.3 points.

Burrell Stockbroking director Richard Herring said the ASX followed a negative lead from offshore markets.

However, Mr Herring said today’s dip should not raise concerns.

“The market has enjoyed a strong run over the last four weeks, from late August, so a little bit of a breather today is not too damaging,” Mr Herring said.

The new federal Labor minority government may awaken investor caution and add to market instability in the coming weeks, he added.

“This might become a very protracted and useless exercise, at the end of the day, because nothing will actually get done (in parliament).

“All we need is just one by-election, or for someone to cross the floor, and it’s just deadlocked and you might end up in this colossal stalemate on policy and that’s not good for anyone.”

The big four banks all finished lower, with Commonwealth Bank losing 57 cents to $51.78, Westpac falling 33c to $22.70, National Australia Bank dipping 45c to $23.95 and ANZ 27c lower at $23.49.

At 0610 GMT, the Australian dollar was at US91.40 cents, up slightly from late yesterday. Against the Japanese yen, the Australian dollar was at Y76.255, down from Y76.835.

The Aussie posted stellar gains against the New Zealand dollar through the Asia session, climbing from around $A1.2650 to a peak of around $A1.2728. The Aussie is also poised to touch fresh record highs against the euro.

In mining news, Sundance Resources announced it had entered into a memorandum of understanding with CRCC China-Africa Construction regarding rail facilities for the iron ore explorer’s flagship project in West Africa.

Sundance shares strengthened by 3c (19.35 per cent) at 18.5c.

The two big miners closed in the red, with BHP Billiton down 53c at $37.91 and Rio Tinto losing 91c at $73.44.

In other news, global beverages firm Foster’s Group said it had received, and rejected, a non-binding proposal to buy its Treasury Wine Estates wine assets for between $2.3 billion and $2.7bn.

Foster’s said the unsolicited expression of interest had come from an international private equity firm. Shares in Foster’s rose 27c (4.45 per cent) to $6.34.

(Source: TheAustralian.com.au)

An analysis by Credit Suisse has found the major banks could raise their rates by up to 20 basis points, outside of the official cycle with the Reserve Bank of Australia.

A move of that size would ease the current pressure from higher funding costs but also increase the banks net interest margins, a key barometer of profitability.

The Commonwealth Bank of Australia has been named as the first bank likely to move because it has the highest level of share of the Australian residential mortgage market.

The bank, which is Australia’s largest by market capitalisation, has a 26 per cent home loan market share compared to Westpac’s 24.3 per cent, National Australia Bank’s 13.1 per cent and ANZ’s 12.9 per cent.

Credit Suisse analyst Jarrod Martin said it was increasingly likely the banks would move out of sync with the RBA, given the current political climate.

“The political risks are clearer,” he said.

“With a minority federal government now being formed by Labor, the major banks can now better assess the political risks associated with undertaking an out of cycle mortgage rate increase.

“We believe it’s a prospect given the apparent funding cost and net interest margin pressures currently affecting bank core earnings growth.”

Mr Martin said an increase, of up to 20 basis points, would reflect the constant pressure on the banks earnings due to higher funding costs.

The major four banks have to raise more than $100 billion over the next year to fund their current and future mortgages.

“This should be viewed as a glass half empty issue,” he said.

“While such a development would be a positive incremental development for bank earnings it should be seen as defensive in nature and highlights the core earnings pressure in the industry.

“It helps compensate for the number pressures on bank core earnings but it does not increase the sustainable earnings power of the sector.”

Still, a price leader needs to step forward. In the past, Westpac and the NAB have taken the lead and raised outside of the RBA but have faced intense political criticism and scrutiny.

Westpac currently has the highest standard variable rate of 7.51 per cent, compared to ANZ’s 7.41 per cent, CBA’s 7.36 per cent and NAB’s 7.24 per cent.

“A price leader needs to emerge,” Mr Martin said.

“We see CBA as the most natural price leader that needs to emerge to allow industry-wide mortgage rate increases to be effected,” he said.

The analysis found that if mortgage rates were hiked by 20 basis points, each of the banks would experience an increase in their net interest margin.

CBA’s net interest margin would move from 2.04 per cent to 2.13 per cent while Westpac’s would lift from 2.27 to 2.37 per cent.

The impact at the banks with smaller mortgage books would be less significant. ANZ’s margin would rise from 2.42 per cent to 2.49 per cent and NAB from 2.25 per cent to 2.31 per cent.

(Source: TheAustralian.com.au)

And they want the new Gillard government to use the promised tax summit to repair the damage to Australia’s reputation with international investors caused by the resource super-profits tax debacle.

As part of the deal to secure the support of independents Rob Oakeshott and Tony Windsor, Labor has agreed to a summit to consider the broader recommendations of the Henry tax review.

Business Council of Australia president Graham Bradley instantly called for a “more sophisticated national discussion” on tax reform, including a more transparent review of policy options.

“As our economy approaches capacity limits, the onus is on all of us to push ahead with the policies needed to keep the economy flexible and responsive,” Mr Bradley said. “A strong economy relies on investment, productivity and participation, all of which are heavily influenced by taxation settings.”

Mr Oakeshott, who had proposed the tax summit, announced yesterday that it would take place. Labor held a tax summit in 1985 under then prime minister Bob Hawke.

National Australia Bank and Woodside chairman Michael Chaney said it was most important that the government acted to ensure that Australia was outward-looking, productive and efficient.

“Over the last term of government we saw workplace relations wound back 15 years and that represents a threat to productivity,” Mr Chaney told The Australian.

“The government must hold the line on tariff reductions, regulation reform and tax reform; and should amend the industrial relations legislation to protect the lower paid, but provide flexibility with regard to the higher paid. I support the government’s announced intention to improve the status of teachers and provide them with merit-based rewards.”

On the tax summit, Pacific Brands, Mirvac and Gloucester Coal chairman James MacKenzie said it was crucial to have “tax reform where all of the stakeholders are taken on the journey”.

He called for the government to expedite implementing the mineral resources rent tax deal that Julia Gillard negotiated to replace the resource super-profits tax.

“The way the first draft was conceived and promulgated left a lot to be desired,” Mr MacKenzie said. “It’s done a lot of damage to Australia’s reputation overseas.”

Business leaders cautioned that they still faced an uncertain global economy and a two-speed economy domestically, and raised concerns that a minority government could stymie economic reform.

Despite the economy having emerged as one of the best performing in the world, global investors have been wary about political uncertainty and the mining tax.

“The new government faces a deeply divided nation,” said Fairfax Media chairman and Reserve Bank board member Roger Corbett. “What any country needs is certainty and decisive government. Clearly I would have preferred a decisive vote for either Labor or the Coalition. This is the worst possible outcome.

“I am pessimistic. I wish Julia Gillard well. As a result of the deal she has done with the independents, she has a right to govern. But she faces a daunting task.”

Flexigroup chairman and Billabong director Margaret Jackson, who is also the former chairman of Qantas, said she was pleased the country finally had a government.

“It is an unusual alliance of interests and I do hope that, going forward, they can work together in Australia’s interests,” she said.

Australian Institute of Company Directors chief executive John Colvin urged Labor, the independents and the Greens to “put the nation’s best interests first — not those of individual electorates or interest groups”.

“Fundamentally, this means a focus on policies that will make Australia a more prosperous country — and that means making it a more productive and business-friendly country,” Mr Colvin said.

“Australia needs more reform, not less. The government should keep in mind there’s ultimately nothing to be gained by punishing the private sector, even though it may appear a way of making easy short-term political gains or appeasing vested interests.”

Australian Chamber of Commerce & Industry chief executive Peter Anderson said that the message from business was “to not allow our nation to experience economic drift or return to business as usual in what is a fraught world economy and a more difficult domestic political environment”.

Other specific areas of concern to business include greater certainty around climate change policy, particularly as the Greens will hold the balance of power in the Senate and Tony Windsor yesterday singled out energy policy as a factor in his decision to support Labor.

“The government needs to provide clarity on what that initiative or those initiatives are going to be. Business needs to know so it can plan with certainty,” Mr MacKenzie said.

Another core demand by business is for improved economic infrastructure in the new term of government.

Leighton Contractors general manager of investment Peter Hicks said investment was needed to support economic growth.

“They’ve just got to bite the bullet and find ways to create that infrastructure,” Mr Hicks said.

“It takes a long time for infrastructure to be brought to market and delivered and impact the economy.

“We just need to keep going with the work that Infrastructure Australia has been doing.”

The new government needed “to be able to hit the ground running” because “it just takes the whole term of a government to actually start a project then get it under way”.

The message about infrastructure investment was echoed by Toll Holdings chairman Ray Horsburgh who urged the government to continue spending on roads and ports.

“We are still desperately short of long-term permanent infrastructure. It’s a proven fact that infrastructure work creates employment and its local money.

“I just hope that some of the promises made in the election campaign come to bear.”

Complex and inconsistent areas of business regulation were also identified by business leaders as areas that they wanted tackled during the new term of government.

Mr Colvin argued that excessive regulation needed to be dealt with urgently and that doing so would benefit the broader community.

“As (former prime minister) Paul Keating once observed, good policy, particularly in the business area, is good politics in the long run,” Mr Colvin said.

“The Gillard government has had a near-death experience and now has a second chance. It shouldn’t waste that chance to govern well and to genuinely improve Australia, despite the difficulties presented by the unusual political circumstances and the fragile alliances which have returned it to power.”

(Source: TheAustralian.com.au)

The number of housing finance approvals rose a seasonally adjusted 1.7 per cent in July from June, the Australian Bureau of Statistics said today. Economists expected a rise of 1.0 per cent.

Housing finance in June was revised higher to show a fall of 3.2 per cent from May, compared with an originally reported fall of 3.9 per cent, the bureau said.

Economists said that with Reserve Bank of Australia sidelined since May, and looking unlikely to hike rates any time soon, a soft landing for the housing sector is in prospect, buoyed by still strong population growth and low unemployment.

The RBA said yesterday the cash rate target remains appropriate for the time being at 4.50 per cent, but left in place a tightening bias with references to surging commodity prices and an investment boom.

Economists are split over the timing of the next rate hike, with many arguing concerns about growth in major economies may keep the central bank out of action until early 2011.

After the housing report, financial markets were pricing in a 14 per cent chance of a rate hike by December.

In a breakdown of the housing data, the bureau said the number of finance approvals to build houses fell a seasonally adjusted 0.7 per cent and the number of approvals to buy newly built houses rose 1.5 per cent. The number of approvals for the purchase of established houses increased 2.0 per cent.

First home owner demand appears to have formed a base, accounting for close to 16 per cent of finance approvals in July, virtually unchanged from recent months.

Su-Lin Ong, senior economist at RBC Capital Markets, said the housing sector is pulling clear of the period at the start of the year which saw weakness as first home buyer grants were wound down by the government as part of efforts to withdraw fiscal stimulus from the strengthening economy.

The Australian economy grew by 1.2 per cent in the second quarter — its fastest quarterly pace in three years — increasing annual growth to 3.3 per cent, beating RBA forecasts.

Interest rates were raised by 150 basis points between October 2009 and May this year, damping housing demand as the RBA charged ahead of other central banks to tighten the monetary policy screws.

Lending has “somewhat stabilised” after weakness earlier in the year, said George Tharenou, an economist at UBS.

“Looking ahead, however, with the RBA on hold and a strong jobs market, this should eventually prove to be a support for the housing market,” he added.

Ben Jarman, an economist at JPMorgan, said the RBA looks like it’s in no hurry to hike rates again as doubts about Europe’s fiscal health increase and anxiety is high about a double-dip recession in the US.

“The RBA’s pause, which we expect will last the rest of the year, will be a net positive for loan demand,” he added.

(Source: TheAustralian.com.au)

The benchmark S&P/ASX 200 index closed lower by 2.3 points, or 0.05 per cent, at 4573.2 points, while the broader All Ordinaries index fell 2.7 points (0.06 per cent) at 4613 points.

The bourse immediately dipped after two key independent MPs – whose votes were crucial to determining which party would form power – said they would back the Labor Party.

But both the All Ordinaries and S&P/ASX 200 rebounded shortly afterwards.

Austock Securities senior client adviser Michael Heffernan said the market was initially unhappy with the Independents’ decision but then backed the move.

“Watching the market as the revelations unfolded, as it progressed, the market dropped a bit at the start but then it picked up,” Mr Heffernan said.

“I think what the market is happy about is that there is going to be a lot more discussion in this parliament about various issues than there was in the past.

“When (Mr) Oakeshott was talking, there was a pretty clear indication that was going to take place, so we may not see anything like the peremptory mining tax implemented,” Mr Heffernan said.

Big miners both lost ground – BHP Billiton fell 11 cents to $38.44 and Rio Tinto lost 65c at $74.35.

Earlier in the afternoon, the Reserve Bank of Australia left the cash rate unchanged at 4.5 per cent.

The big four banks all posted gains, with Westpac leading the way and rising 25c (1.1 per cent) to $23.03.

Investment bank Macquarie Group bucked the trend to post its second day of losses after flagging a profit downgrade yesterday.

Macquarie fell 78c (2.21 per cent) at $34.47.

Gold miner St Barbara proposed consolidating its share base, and stocks in the company fell 2c to 36c.

Andean Resources, which saw strong gains in the last two trading sessions, added 4c at $7.04. The gold miner today told the stock exchange it did not breach listing rules by failing to immediately reveal a takeover proposal from Eldorado Gold.

At 0600 GMT, the Australian dollar was at US91.34c, down from US91.70c late yesterday. Against the Japanese yen, the Australian dollar was at Y76.835, from Y77.375.

(Source: TheAustralian.com.au)

The Reserve Bank of Australia governor Glenn Stevens inserted the words “for the time being” in his accompanying statement when saying that the current monetary policy setting was appropriate. Those words were absent from his August statement.

The central bank met the expectations of financial markets and economists by keeping the official cash rate steady at 4.5 per cent for September.

Economists believe inflationary pressures will begin to emerge as a problem for the Australian economy, especially as the nation exceeds growth expectations.

In the June quarter, the economy grew by 1.2 per cent, the fastest quarterly pace in three years – the growth translated to 3.3 per cent for the year.

The economy is also expected to show more signs of strength this Thursday, when the August unemployment rate is tipped to fall from 5.3 per cent to 5.2 per cent.

The RBA last lifted interest rates in May, one week before the federal budget.

Mr Stevens said today that while the government’s $43 billion worth of stimulus was beginning to fade out of the economy, there were signs that consumers were beginning to become more positive.

“Recent information suggests that the Australian economy has been growing at around trend pace,” he said.

“This has been helped by high levels of public spending over the past year but private demand has also been firming.

“The high level of the terms of trade is boosting incomes, which will tend to add to demand over the year ahead while the effects of expansionary policy measures will be diminishing.

“Indications are that business investment in particular could increase strongly.”

The statement gave the financial markets the indication that interest rates could be hiked in the next few months, possibly before the end of the year.

“With growth in the near term likely to be close to trend, inflation close to target and with the global outlook remaining somewhat uncertain, the board judged this setting of monetary policy to be appropriate for the time being,” Mr Stevens said.

Despite the prospect of higher rates, the Australian dollar has been sold off after the RBA’s announcement. The local currency moved from US91.72c, to US91.40c.

(Source: TheAustralian.com.au)

In an update since the lacklustre reporting season, strategist David Cassidy told clients today the Swiss bank has also exited Computershare, APN News & Media and Ten Network Holdings on disappointing results.

But despite US-exposed stocks struggling on fears of double-dip recession in the world’s biggest economy, UBS continues to hold Brambles and has added some additional cyclical exposure, albeit from a low level, via Sims Metal Management and Aristocrat Leisure.

UBS has also added Flight Centre on a “strong result” and “undemanding” price to earnings ratio of 13 times full-year 2011 earnings.

The bank has also added Leighton Holdings for mining services/capital expenditure exposure.

“We are staying underweight industrial defensives on valuation grounds and given our positive market view,” said Cassidy. “We have switched out of Telstra into Woolworths post results. We retain overweights in Resmed, AGL Energy, Crown Limited.

“In non-bank financials we have added Insurance Australia Group and Challenger Financial Services Group where we see a solid earnings outlook and supportive valuation.

“We have exited ASX Limited.”

UBS is underweight banks after reducing from neutral, but has increased its overweight exposure to mining and mining services on its positive view on markets.

Analysts are concerned of the banks growth profile due to a modest earnings outlook and revenue headwinds.

“We have retained a pro-cyclical tilt via mining and industrial cyclicals,” said Cassidy.

UBS has retained its underweight position in real estate investment trusts.

(Source: TheAustralian.com.au)

But the little enterprise they called Intrepid Travel is now a multimillion dollar company aiming for an initial public offering in a couple of years.

“We are setting up our company to do a float,” Mr Manchester said.

Intrepid fills what is a growing niche for adventure travel. Want to trek to gorillas in Uganda, or climb up Mt Everest? Intrepid may be able to help you out.

It undertook about 10,000 trips last year, and the number is growing fast.

In its 21st year, the company founders have high hopes for the share float after last year posting a pre-tax profit of about $10 million and turnover of $120 million.

The company has spread out from its Asian focus in the past few years so that its tours are not concentrated in one region.

That lowers the risk of being exposed to a particular area in the event of a political or natural disaster that could unsettle travellers.

Intrepid now employs about 1000 staff and has offices in 25 countries.

“If there is a trouble spot somewhere, we can be somewhere else and we can shift demand and moderate out the cash,” Mr Wade said.

They say being an adventure travel operator has advantages, because clients aren’t so picky if something minor goes wrong.

“They buy an adventure holiday, so they don’t necessarily expect it to be as smooth as silk,” he said.

(Source: TheAustralian.com.au)

The benchmark S&P/ASX 200 index rose 34.3 points, or 0.76 per cent, to 4575.5 points at close of trade, while the broader All Ordinaries gained 38.1 points (0.83 per cent) at 4615.7 points.

CommSec market analyst Juliette Saly said US jobs figures on Friday had helped spur local investors.

“Our market rose about 4 per cent over the course of last week, and it is nice to see more momentum,” Ms Saly said.

It was also significant that the All Ordinaries had gone above the psychological 4600 point barrier, she said.

Financials were mainly stronger, but investment bank Macquarie bucked the trend to fall $1.74 (4.7 per cent) at $35.25 after it said its first-half profit would likely fall by 25 per cent.

But the big four banks all posted solid gains – Commonwealth Bank was up 55 cents at $52.12,Westpac rose 28c at $22.78, National Australia Bank lifted 18c at $24.28 and ANZ gained 37c at $23.66.

The Australian dollar nudged higher in a quiet Asia session, and trading was expected to remain subdued due to a Labor Day holiday in the US, Dow Jones Newswires reported.

The positive risk tone was buoyed by the US jobs number and should hold for at least the early part of this week, said Morgan Stanley Strategist Emma Lawson.

The major focus is on tomorrow’s Reserve Bank of Australia policy meeting. While the central bank is expected to leave the cash rate unchanged at 4.5 per cent, much will be read into its accompanying commentary.

Also in focus will be whether Australia reaches agreement to form a new minority government, with a decision by three key non-party lawmakers also due tomorrow.

Before then, CMC Markets Trader Tim Waterer said the local unit would take its direction from metals and stock prices.

He pegs support for the Australian dollar at US90.50 cents, and resistance at US92.20c.

“If equity markets continue to run higher, then US92c can be hit this week, and US92.50c is on the cards, depending upon how robust Thursday’s employment numbers are,” Mr Waterer said.

At 0600 GMT, the Australian dollar was at US91.70c, up from US90.79c late Friday. Against the Japanese yen, the Australian dollar was at Y77.375, from Y76.475.

For bond futures, the three-year contract fell 13 ticks to 95.43 on the better tone, while 10-years fell nine ticks to 95.07.

Back in equities, insurers were less impressive, with investors fearful about exposure to the 7.1 magnitude earthquake that hit Christchurch early on Saturday.

Suncorp-Metway fell 3c (0.35 per cent) to $8.58, despite reaffirming full-year earnings guidance.

Insurance Australia Group pared back early losses to rise 1c to $3.48 at the close.

The materials sector was nearly 1 per cent higher, with gains to big miners, including a small rise to BHP Billiton, despite the world’s largest resources company going ex-dividend. BHP Billiton shares were 22c higher at $38.55.

Ms Saly said the gold sector had a good day, with Norton Gold Fields jumping 20 per cent to 21c after it completed a litigation settlement.

Gold explorer Andean Resources gained nearly 10 per cent to $7, after it emerged from a trading halt following a takeover bid from Goldcorp Inc.

The energy sector was mixed, but Cougar Energy had a positive day, jumping nearly 23 per cent to 3.8c, after it struck a deal with the Queensland government that could see its Kingaroy coal gasification pilot plant reopened.

Qantas shares fell 1c to $2.52 on the weight of a High Court ruling that could force the carrier to pay back millions of dollars in commissions to travel agents.

Retirement-village owner Aevum put on 3.5c at $1.74, after it said an expert report supports its view that the unsolicited takeover bid by rival Stockland was not high enough.

(Source: TheAustralian.com.au)