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Australian Financial Review
– Australia's top Treasury and regulatory chiefs are concerned record-low interest rates could destabilise the financial sector amid predictions many Australians will struggle to service their share of the nation's $1.4tn mortgages when interest rates rise.
– Newcrest managing director Sandeep Biswas said he would not consider selling assets, raising more cash or developing expensive new mines until his existing operations improve. Last year's $6.2bn impairment may be followed by $1.5-2.5bn this year. Lihir was acquired for $US10.5bn and is still only producing close to break-even at $US1297 per ounce.
– Macquarie Group's volatile stockbroking business is likely to hit the investment bank's full year earnings with profit at its securities unit expected to fall below last year's $100m. Earnings are still expected to be a bumper $1.27bn.
– Household debt servicing payments (interest plus principal) as a percentage of disposable income have sat above 20% since 2006 despite lower interest rates. In 1986, this number was 7.5%.
– A study commissioned by the Australian Chamber of Commerce and Industry, the Business Council of Australia and the Minerals Council of Australia shows the Renewable Energy Target (RET) will lead to higher electricity costs. This contradicts a government study, the difference primarily relating to assumptions on the cost of new builds in a tight period. The watered-down 'true 20%' target is believed to be a key recommendation of the review being carried out by Dick Warburton. Environment minister Greg Hunt and industry minister Ian Macfarlane are the lone supporters of keeping the target with cabinet.
– EU diplomats are expected to consider imposing sweeping sanction on Russia that could include a ban on all Europeans purchasing any new debt or stock issued by big Russian banks.
– Atlas Iron was forced to sell its iron ore at close to a loss in the June quarter amid huge pressure on margins created by an explosion of supply from the Pilbara majors. The junior is moving to slash production by up to 85% in its lower grade ore, but will continue an aggressive increase of its higher-quality ore production as it aims for a fresh record. Average price of $US74 per tonne versus all-in cash costs of $US70 per tonne. It achieved $US103 in the March quarter. Production ramp up from the big three is displacing high-cost players in China.
– Insurance Australia Group has upgraded its full-year profit margin expectations predicting an insurance margin of 18-18.3%, a big hike from the previously flagged 14.5-16.5% range. Natural disasters hit $555m compared with an allowance of $640m. IAG is overhauling its operating model to absorb the Wesfarmers insurance acquisition and is expected to book a $100m restructuring bill.
– The ASX may face a hit to earnings in 2014-15 after it introduced fee reduction on interest rate futures and over-the-counter derivatives, a response to more competition.
– Software company Xero could list in the United States as early as 2015, cashing in on its sharemarket success at home and its position in the rapidly growing cloud technology industry. Annualised operating revenue has now hit $US70m. Targeting 80% growth this year after 84% achieved last year.
– Newcrest shares plunged 6% in response to another writedown, wiping $540m from the group's market capitalisation.
– Macquarie Group has halved the number of its financial advisors in its private wealth business since January's 2013 regulatory crackdown against widespread breaches of standard for financial advice.
– A preliminary gauge of Chinese manufacturing activity reached an 18-month high this month, in a sign Beijing's efforts to stimulate the economy are having an effect. The reading cheered markets in Asia with Hong Kong stocks hitting their highest level in three years.
– The Australian boss of Hutchison Ports has confirmed the company will hold talks with International Container Terminal Services about an east coast joint venture to compete with Patrick and DP World Australia, as it plans to offer a 'compelling value proposition' to break the stevedoring duopoly who hold 57% and 42% market share respectively. $1.2bn industry, stevedores face higher rents due to port privatisations.
– Brewing giant CUB, owned by British listed SABMiller reported a 3% decline in Australian volumes, with revenue down 6% due to lower prices.
– South Korea – Australia's third largest export destination – is expecting GDP growth of 3.7% this year, lower than its earlier forecast of 4.1%.
– Facebook has put to rest any lingering doubts about its ability to transform its business into a mobile-advertising juggernaut. The social network's reported profit more than doubled and revenue topped estimates for the ninth straight quarter. 62% of Facebook's ad revenue now comes from advertising on mobile devices which is expected to eclipse newspapers, magazines and radio for the first time in the US. Revenue rose 61% to $US3bn, profit was $US790m, shares have now doubled since the IPO to trade at $US75. Facebook commands roughly 18% of the $US18bn mobile ad market this year, up from 9% two years ago. Google is still no.1 but its share has fallen from 50% to 40%. Active user growth is slowing to around 4% per quarter.
Daily news summary