Finance

Market falls… Credit squeeze hits home loans… Mobile spam crackdown… APEC free trade?… Coates results… PwC harassment wrangle

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US consumer confidence low hits Aust markets

The biggest fall in a key US consumer confidence index since 2005 has triggered selling on Australian sharemarkets today, with the S&P/ASX 200 losing 1.7% to 6069.3 by 12.25pm.

The Australian losses, the biggest since August 15, follow a decline in the US S&P 500 index by 2.4% overnight.

US consumer confidence fell in July by the most since just after Hurricane Katrina in 2005, according to the New York based Conference Board’s consumer confidence index. Separately, S&P/Case-Schiller said property values in 20 US metropolitan areas decreased 3.5% in June from a year earlier, the steepest slide in at least five years, Bloomberg reports.

The Australian dollar has also taken a hit on the news, falling from yesterday’s closing price of US 82.36c down to US80.77c by 12.36pm.

Mike Preston

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Credit squeeze to hit home loans: RBA

A senior Reserve Bank of Australia official has admitted home loan rates in Australia could be forced up by the international credit squeeze triggered by the sub-prime mortgage disaster in the US.

RBA deputy governor Ric Battelino told the Retail Financial Services Forum in Sydney yesterday that as banks could soon be forced to pass on to consumers the increased cost of obtaining finance on international markets they are currently facing.

“My guess is if these funding pressures continue, some of that downward pressure on home lending rates is going to start being reversed because the lenders won’t be able to offer the discounts they’ve been having” Battelino said, according to The Australian Financial Review.

Despite recent central bank interventions, the market tremours causing the credit squeeze are likely to continue, Battelino says, with investors continuing to display “a high degree of nervousness”.

Battelino also gave his view on how the volatility of recent weeks came to pass.

“What seemed to be worrying people was that, while the US Fed had calculated the losses in the sub-prime market as being potentially as high as $US100 billion, only a few billion of losses had been announced by investment funds. This naturally led market participants to question who was sitting on the prospective losses, and what this meant for the creditworthiness of market counterparties.

“Investors became much more risk-averse and banks severely curtailed their lending to each other, causing gridlock in the money market. The process spread quickly because once banks started to worry that others may stop lending to them, they in turn stopped lending to others,” he said.

Mike Preston

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Mobile spam crackdown

The Australian Interactive Media Industry Association (AIMIA) has launched guidelines for advertising on mobile phones, to head off problems for an industry that is expected to be worth $1.3 billion by 2010.

Spam is shaping up as a problem for the industry regulator and advertisers. Three companies have been fined in the past two months, according to a report in The Australian Financial Review. Last year the Australian Communications and Media Authority received 506 complaints related to mobiles.

The AIMIA guidelines aim to ensure uniformity in the creation and size of display of ads for mobile phones.

The Mobile Premium Services Industry Code, which came into effect last December, prohibits mobile spam. Mobile operators have launched their own crackdown, dropping content or fining service providers who break the new rules.

Jacqui Walker

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APEC free trade agreement?

Next week, world leaders will gather in Sydney for the Asia Pacific Economic Co-operation summit to discuss the possibility of expanding or merging existing free trade agreements to form the basis of an APEC-wide free trade area.

The possibility is gaining traction because the World Trade Organisation Doha talks hit a brick wall in June when the US and EU refused to cut farm tariffs and subsidies until developing countries such as India opened their markets to manufactured goods and services.

Jacqui Walker

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Small cap result: Coates

Coates Hire has reported an 8% fall in annual profit, and says it has rejected approaches for taking over the company. Australia’s largest equipment hire firm also said it expects earnings this financial year will be about 15% above last year. Coates made a net profit of $92.38 million in 2006/07, down from $100.04 million in the previous year.

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PwC sexual harassment suit

Six PricewaterhouseCoopers partners have declined to be represented by the firm’s lawyers in its defence against a $10 million claim for sexual harassment and discrimination from former partner Christina Rich.

Rich, who earned more than $900,000 a year as an expert in international transfer pricing, claims there was a culture of sexual harassment and victimisation at PwC. PwC has denied the claims.

The fact that the six partners do not wish to be represented by the firm’s lawyers, Mallesons Stephen Jaques, has caused speculation that they might give evidence against the global accounting giant in the case.

Jacqui Walker

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