Friday, August 19, 2011

Respite from sharemarket volatility ends with a thud

The brief rally on global sharemarkets ended with a thud this morning as fears about Europe's debt crisis and America's economic recovery deepen.

Wall Street has closed around four percent weaker after a surprise fall in US housing starts and a rise in claims for jobless benefits. Earlier, markets dived across Europe on deeper worries about sovereign debt exposures. Paris and Frankfurt ended around 5.5 percent weaker

The worsening outlook spooked investors and raised fresh concerns that the US might fall back into recession.

Here's how I reported it on this morning's editon of AM.

Thursday, August 18, 2011

Westfield resilient in the face of cautious consumers overseas and at home; plans to offload $2 billion of assets but wary about looming liquidity crisis.

The shopping centre giant Westfield says it's withstanding a weak retail environment as it delivered a 30 percent fall in half year profit yesterday (August 17).

Unlike its key competitors, Westfield has been resilient during the various stages of the global financial crisis, but says it's been able to adapt to a more cautious consumer and changing shopping patterns around the world.

The company has also been under pressure to fill vacant retail space caused by the high profile closures of Borders books and the Colorado clothing chain.

Here's my take on the results and overall consumer sentiment, broadcast on The World Today.

Wednesday, August 17, 2011

Getting on the front foot with bad news. ABC News Online's digest of the media blitz by Qantas boss Alan Joyce.

There are a few sayings in the world of issues and crisis management that apply to the media strategy being used by Qantas at the moment.

My favourite is "get on the front foot with your own bad news". I also have a lot of time for " when you're in a hole, stop digging." 

Chief executive Alan Joyce has been virtually unstoppable since the controversial announcement about his airline's survival hit the Australian Securities Exchange almost 24 hours ago.

The softly spoken Irishman must be close to losing his voice by now.

Here's a compilation of the media blitz highlights from Michael Janda of ABC News Online.

Qantas chief Alan Joyce denies his planned overhaul amounts to "offshoring"; likens decision to BHP Billiton digging a mine in Japan.

The embattled chief executive of Qantas has likened his drastic overhaul of the airline to BHP Billtion mining overseas of the ANZ opening banks in emerging Asia.

But Alan Joyce told me this morning that the strategy is not offshoring, even though a thousand local jobs will be cut and two new airlines will be established in Asia.

Mr Joyce also revealed the decision was not signed off by the Qantas board until just before yesterday morning's announcement and he maintains the deal can be done without changing the Qantas sale act.

Here's my interview with Alan Joyce from this morning's edition of AM.

Tuesday, August 16, 2011

Reserve Bank's "prudent" decision to hold interest rates steady vindicated, board minutes show.

The minutes from the most recent meeting of the Reserve Bank board have highlighted how an interest rate rise was narrowly averted just days before the recent sharemarket mayhem began to unfold.
According to the minutes from the August 2 meeting, the central bank weighed up the risks of rising inflation in Australia before deciding it would be “prudent” to leave rates on hold because of the growing economic storm clouds over Europe and the United States.
With the benefit of hindsight, the members of Reserve Bank board are probably glad they took the “prudent” approach ahead of inflation fears given the events of the past fortnight.
Listen to my analysis from today's edition of The World Today.

Read more analysis from my ABC colleague Michael Janda.

Monday, August 15, 2011

World Bank president warns the global economy is approaching a new "danger zone".

The president of the World Bank, Robert Zoellick has warned that the deepening economic woes in the United States and Europe have pushed the world into a new "danger zone".

Listen to my interview with Robert Zoellick broadcast on the ABC's AM program here.
Mr Zoellick also believes a lack of confidence in America's economic leadership during the debt ceiling impasse with the US Congress was largely responsible the recent heavy falls on global sharemarkets.

And he urged international leaders to move quickly to restore the crisis in global confidence after Standard & Poor's removed America's AAA credit rating.

"I think we are entering a new danger zone and I think that confidence in economic leadership has been slipping and it will be important that the primary economic actors take steps both short and long term to restore that," Mr Zoellick told reporters after addressing the Asia Society in Sydney last night.

"I think the challenge has been for understandable political reasons, the European decision mechanism has continued to muddle along and put together packages that while are significant in their political difficulty, have not matched the test of the economic need and that, I think, contributed to the weakening of confidence."

Mr Zoellick also warned policy makers to continue foster free and open markets to ensure that protectionism does not re-emerge.

"In the short term it will primarily be dependent on actions such as that from the European Central Bank but over time it will require attention to some of the fundamentals and those fundamentals not only deal with sovereign debt and the challenges of basic competitiveness but they also deal with putting in effective growth strategies," Mr Zoellick said.

"Given the phase that we are now moving into we could face increased temptations of protectionism and the best defence against protectionism is to be on offence by opening markets."

Mr Zoellick said that while he expects the world to move toward a system of multiple reserve currencies, the US dollar will probably remain the principal one despite the Standard & Poor's downgrade.

And he signalled that China might not be prepared to pump additional stimulus into its economy, given rising inflation, and a possibly overheating property market.

The intervention of the Chinese government in 2008 and 2009 insulated China from the global downturn and in turn stimulated demand for Australian resources.

"China is totally capable of managing this but I think one of the side effects of the policy implemented a few years is that there are going to be some bad loans from the investment stimulation. I don't think it's got the same freedom of that degree." Mr Zoellick said.

Mr Zoellick also highlighted the strengths of the Australian economy which avoided the 2009 global recession because of structural reforms.

"Australia is in a much better position than other developed countries in part because Australia undertook a lot of the structural reforms," Mr Zoellick said.

"Whatever the policy decisions, and political decisions in Australia, it's in a better position along with the fact it's continued to pursue an open trade policy and take advantage of its position in the Asia-Pacific."


Sunday, August 14, 2011

World Bank chief says the global economy is confronting a "new and more dangerous phase" as European sovereign debt bombs continue to tick.

The president of The World Bank, Robert Zoellick, is currently in Australia and will be addressing The Asia Society in Sydney this evening.

As a preview, here's what he imparted beforehand to The Weekend Australian.

It's certain to be an interesting event and an important opportunity to get beyond the market volatility and consider where the EU has a way out of this mess.

I'll be reporting Mr Zoellick's address for tomorrow's edition of AM.