Australian shares end lower, pulled down by the big banks, while the Australian dollar recovered from  six-week lows after the widely expected decision by the RBA to leave rates on hold.

4.55pm: That's it for today - thanks everyone for reading this blog and posting your comments.

Here's our evening wrap of today's session.

4.47pm: Foreign holdings of Australian government debt have slipped from record highs, sparking claims the overseas hunger for Aussie dollar assets may be waning.

Australia has become a safe haven for global capital in recent months, with overseas investors snapping up government bonds in record numbers, putting a key support under the dollar.

However, an analysis of today’s balance of payment statistics by JPMorgan has found the increase in foreign holdings of government bonds during June was the smallest in three years.

Overseas investors added $5.1 billion worth of government bonds to their portfolios in the June quarter, it found, which was the smallest increase since June 2009.

Because of this slowing, the share of the $245 billion in government debt that is held by foreigners has dipped from its record high of 79 per cent in the March quarter, to 77.5 per cent.

JPMorgan interest rates strategist Sally Auld said it was too early to say the trend would last, but it appeared the rush into Aussie bonds from central banks and sovereign wealth funds was slowing.

4.42pm: The biggest drag on the market came from the big four banks, which all closed lower:

ANZ backpedalled 2 per cent, Westpac ended down 2.1 per cent, at $24.32. They were the two worst-performing stocks on the S&P/ASX20.

Commonwealth Bank was off 36 cents at $54.463 and National Australia Bank fell 20 cents to $25.10.

4.38pm: Meanwhile, BHP Billiton advanced 0.5 per cent and Rio Tinto rose more than 1 per cent, after commodities prices firmed in London trade.

4.30pm: Fortescue was one of the big losers today, after it said it's slowing its ambitious expansion program and cutting jobs.

The iron ore miner's shares lost 15 cents, or 4.2 per cent, to close at the day’s low of $3.41; its lowest close since June 10, 2009.

It's also one of the most shorted stocks on the sharemarket, with some 15.8 per cent of the company’s stock held by short interests - who are speculating on a further fall.

4.25pm: The Swiss economy unexpectedly contracted in the second quarter for the first time in almost a year, as exports declined and companies cut spending.

Gross domestic product fell 0.1 per cent from the first quarter, when it rose a revised 0.5 per cent. Economists had forecast a gain of 0.2 per cent. In the year, the economy grew 0.5 per cent after expanding 1.2 per cent in the first quarter.

The Swiss economy is faltering as the euro area’s deepening slump and waning global growth erode export demand, forcing companies to lower costs.

The Swiss central bank a year ago imposed a franc cap to ward off deflation risks, with President Thomas Jordan yesterday saying any further currency gains would pose ‘‘a very substantial threat’’ to the economy.

4.19pm: Among the major sectors, financials lost 1 per cent, industrials fell 1.1 per cent, while materials slipped just 0.1 per cent.

4.14pm: The market has closed lower, pulled down by the big banks. The benchmark S&P/ASX200 index fell 26.2 points, or 0.6 per cent, to 4303.5, while the broader All Ords index lost 26 points, or 0.6 per cent, to 4325.6.

4.08pm: The RBA could cut rates as early as October if it sees signs of weakness in the labour market while commodity prices continue to plunge, Market Economics managing director Stephen Koukoulas says:

A weak jobs number on Thursday may be enough to “force them across the line” and cut rates.

The market is tipping a rise in the jobless rate to 5.3 per cent in August, from 5.2 per cent in July.

  • I'm sure one of the reasons the RBA had been cautious about rates in the first half of this year was that the unemployment rate was only around 5.25 per cent. I reckon they need to see it move higher.
  • Also, if we don't get a pick-up in the commodities price cycle, that would be a catalyst.

The market, meanwhile, is tipping a 25bp cut in November, expects another one in December and a third cut by February, which would together bring the cash rate down to 3.75 per cent.

3.57pm: The Reserve Bank board disappointed another troubled Australian industry today - the one devoted to speculation about and betting on the next move in interest rates, Michael Pascoe comments:

No change is no news for media and little change for traders. What's missed is that the industry is devoted to wanting a move, any move, but the RBA likes nothing more than steady monetary policy.

Given the expected and delivered reasons for today's decision to leave the cash rate unchanged - growth around trend, inflation near the bottom of the desired range, unemployment low - keeping rates unchanged month after month puts the RBA in the central banker's sweet spot.

3.45pm: While the stockmarket has hardly reacted to the RBA's rates decision, the dollar is still on its way up, last trading at $US1.0267, nearly half a cent off the day's low.

‘‘The RBA is waiting and is on pause for now, which could be one of the reasons why market players are buying back the Aussie a bit,’’ says Lee Wai Tuck, a currency strategist at Forecast in Singapore. ‘‘It’s a bit of a knee-jerk reaction. But I think it’s still a sell on rallies and the risks are still to the downside.’’

3.31pm: No change on the rate decision today was widely expected and made no real material impact on today’s index, as our markets remain poised for this week’s ECB meeting to take its cues, says CMC Markets trader Ben Taylor:

  • It seems the RBA wants to wait and see how its recent rate cuts are filtering through the economy before committing anther cut. The recent downturn in data would however excuse you from believing that we may be in for a cut sooner than later.
  • Attention is now turning to the ECB policy meeting on Thursday. Whilst it seems (ECB chief Mario) Draghi’s hands will be tied until the German court ruling we will however expect to hear continued support for the idea of an ECB bond buying program to support the eurozone as needed.
  • (Fed chairman Ben) Bernanke’s talk last week also means that this Friday’s non-farm payroll numbers will be of particular importance.
  • The American labour market is of grave concern as unemployment causes suffering and wasted talent, Bernanke is looking to right this wrong and therefore any additional fall off in jobs numbers is expected to be met with strong stimulus support.

3.20pm: Another comment on the RBA statement, which as mentioned earlier is being (over)analysed for any indication of a change in the bank's rates stance:

ANZ head of Australian economics Ivan Colhoun says nothing suggests the board is changing its view on rates quickly - but it could be:

If you read the RBA statement a couple of months before they ended up easing each time in the past year, you would have gotten exactly the same sort of picture – they’re comfortable with growth, unemployment isn’t going up, they don’t need to ease.

Then in the next two months they’ve changed their views. I think that’s again what will happen.
 
ANZ anticipates two more rate cuts by the first quarter of 2013.

3.12pm: While the RBA's decision was much expected, leaving the statement to be dissected by diehard RBA watchers, the market's focus is clearly on Thursday's rates decision by the European Central Bank, where some more statement on the controversial buying of Spanish and Italian government bonds is expected.

Meanwhile, eurozone lending rate divergence grows, the FT reports:

Interest rates paid by companies in the eurozone’s weaker economies have surged, highlighting the bloc’s fragmentation as the ECB loses control of borrowing costs. ECB data on Monday showed Spanish small businesses face the highest bank borrowing costs in almost four years – while interest rates paid by German rivals are at record lows.

2.57pm: Couple of tweets on the RBA's decision - not all of them agreeing with Mr Stevens:

RBA now playing with fire. A stubborn "glass half full" attitude is a risky strategy.

- Stephen Koukoulas (@TheKouk)

Comparison #RBA statements reveal major rewrite of global outlook & comm price para's yet no change to conclusion!

- Glenn Maguire (@AsiaSentry)

Sensible RBA resists call for cuts

- Christopher Joye (@cjoye)

...#RBA on hold but our view remains cash rate will fall to 3% by year end. See growth below trend. Fall in comm prices not helping

- Shane Oliver (@ShaneOliverAMP)

2.51pm: HSBC chief economist Paul Bloxham says the RBA’s decision suggests the central bank has not been swayed by recent concerns that Australia’s mining boom might be over.

  • You could say it’s a bit more hawkish than markets are implying at the moment.
  • Stevens’ statement suggests the central bank is satisfied with the current rate of inflation and economic growth, despite the worsening global outlook.
  • It really fits with our view that they still feel like they are ahead of the game a little, having cut rates earlier.

2.44pm: Here's the RBA's statement on today's rates decision. Altogether very measured.

2.41pm: The RBA board seems pretty comfortable about current interest rate settings, says AMP chief economist Shane Oliver:

It could change. They could spin around pretty quickly as they have in the past. It could quite easily change if the iron ore price stays where it is or if we see another month of weak data like we did in August.

Recent ANZ job ads, building approvals and retail sales data were all lower despite earlier rate cuts from the RBA.

2.36pm: Some more comments by RBA governor Glenn Stevens in the rates statement:

  • Current assessments are that global GDP will grow at no more than average pace in 2012, with risks to the outlook still on the downside.
  • Growth in China remained reasonably robust in the first half of this year, albeit well below the exceptional pace seen in recent years.
  • Some recent indicators have been weaker, which has added to uncertainty about near-term growth.
  • Markets for key natural resources are adjusting accordingly. Some commodity prices of importance to Australia have fallen sharply in recent weeks.
  • The terms of trade peaked a year ago and have declined significantly since then, though they remain historically high.

2.31pm: In its statement, the RBA points out that the exchange rate has remained higher than expected.

The dollar is trading at $US1.0250, slightly higher than before the decision.

2.30pm: The RBA has kept rates unchanged at 3.5 per cent, as predicted.

2.26pm: Minutes before for the RBA's release, the dollar is at $US1.0238. Shares are now down 0.7 per cent.

2.17pm: Oil prices are higher as weak manufacturing numbers from Europe and China boost hopes of fresh central bank stimulus measures, analysts say.

New York's main contract, light sweet crude for delivery in October, has advanced 78 cents to $US97.25 a barrel and Brent North Sea crude for October delivery has gained 37 cents to $US116.15.

Traders are hoping that the bleak European and Chinese manufacturing data will lead to more stimulus soon, says Nick Trevethan, senior commodities strategist for ANZ Research in Singapore.

"Certainly the data of late I think has been supportive of policy easing. China's in particular do suggest something needs to be done there," he's told AFP.

2.14pm: Asian markets are mixed this afternoon as attention turns to a European Central Bank policy meeting later in the week, with dealers hoping for plans to restart a bond-buying program.

With US markets closed for the Labor Day holiday and few catalysts, regional investors took a wait-and-see approach with the ECB meeting on Thursday as well as closely watched US jobs figures due on Friday.

Tokyo, Hong Kong and Shanghai are flat, while Hong Kong and Seoul are 0.10 per cent higher.

2.02pm: Stocks are now near a low for the session. The ASX200 is down 21.2 points, or 0.5 per cent, to 4308.5.

1.54pm: More bad news for the retail sector and jobs: Women's fashion chain Ojay has reportedly collapsed with David Coyne and Gideon Rathner of firm Lowe Lippmann appointed as administrators.

Only one day after figures from the Australian Bureau of Statistics showed overall retail sales fell 0.8 per cent in July, the worst monthly result in 21 months, it is reported that Ojay has added its name to the string of recently failed retail businesses as shoppers continue to rein in their spending habits, Eli Greenblat reports.

Adding to the woes, Australian Convenience Foods fell into voluntary administration on August 28 and Deloitte are currently running a sale process to sell the business as a going concern to a new owner. Expressions of interest for buyers closes tonight.

It is believed Australian Convenience Foods had been running at a loss for a number of years and was in the midst of a restructure when it was handed to administrators. It employs 400 full-time staff across five sites in Australia and is the biggest supplier of fresh ready-to-eat meals to the convenience store sector.

Full story here. 

1.46pm: DuluxGroup has again extended the deadline for Alesco shareholders to accept its $210 million takeover offer.

After extending the acceptance deadline to September 11 two weeks ago, the new date is now October 2. The move comes after the Takeovers Panel rejected calls by Alesco to investigate what it called misleading claims being made by Dulux in relation to the offer.

Dulux has not commented on the Takeover Panel’s decision, but says that shareholders with 44.3 per cent of Alesco’s stock have now accepted its offer.

‘‘Given this growing support from Alesco shareholders, including professional investors, DuluxGroup has decided to extend the closing date of its offer to 2 October, 2012 to allow you to also accept if you haven’t already done so.’’

1.35pm: Lawyers will hold an emergency meeting this week in hopes of avoiding a five-month blow-out in the trial over the collapse of Storm Financial.

Representatives of ASIC, the Commonwealth Bank, Macquarie and Bank of Queensland will fly to Sydney on Thursday for the meeting. Proceedings in the Federal Court are due to commence next Monday.

If negotiations are successful, the trial will be delayed by a week but will finish before Christmas. But any failure to agree on evidence would likely mean the trial would run until March next year.

ASIC is currently pursuing action against the banks seeking compensation and is seeking orders for the banks to improve their standards. The trial relates to the collapse of Storm Financial in 2008.

1.12pm: More on Fortescue. Fortescue’s credit quality would be at risk if iron ore prices stay below $US100 a tonne through December, a Standard & Poor's director said today after the miner moved to slash costs.

"The negative pressure is building up because of the rapid and continuous decline in iron ore prices," said S&P resources corporate ratings director May Zhong.

"From our side they need to do more to give them more buffer in their rating." 

1.07pm: The ASX200 has just bounced off a fresh intraday low. At about 1pm, the benchmark index hit 0.52 per cent lower but has since climbed back to about 0.46 per cent lower.

1.02pm: Here’s a comment from Fortescue CEO Nev Power made during today’s conference call on the issue of iron ore prices:

While we remain very confident in the future of the iron ore price and that it will rebound into that range above $US120 per tonne, clearly given the current conditions in China, it is going to take some time to recover to that level.

12.55pm: For those taking part in the discussion in the comments section today, here's a definition of the term 'Pollyanna' from the Oxford dictionary:

A cheerful optimist; an excessively cheerful person. ORIGIN: the name of the optimistic heroine created (1913) by E.H. Porter (1868–1920), American author of children's stories.

12.43pm: National Australia Bank currency strategist Ray Attrill said the slide in the local to $US1.0224 US cents, its lowest point since July 25, was due to the Fortescue announcements.

‘‘That has really be the driver of that fall,’’ he said.

Fortescue announced it would defer $US1.6 billion ($A1.57 billion) in spending on expansion and would cut staff in response to falling iron ore prices. The move follows BHP’s decision to shelve its Olympic Dam mine expansion plans in August.

Mr Attrill said the tone of this afternoon's RBA statement on monetary policy could move the market.

‘‘Were they to say that the economy was not performing as well as they had thought or if they want to highlight the level of the currency in relation to iron ore prices, in particular, then the market will sit up and take notice,’’ he said.

‘‘But, if we do get a studiously neutral type of statement, then it’s likely the Australian dollar will get a little bit of support.’’

12.35am: Fortescue shares have reversed their fortunes. The company's shares gained as much as 3.37 per cent in early trade, but a reversal saw them slip to a loss of 3.65 per cent. But much of that loss has now been recovered to see the shares 1.7 per cent lower to $3.50, a level not seen since May 2010.

12.30pm: Bell Direct equities analyst Julia Lee said the Australian sharemarket was focused on the upcoming European Central Bank (ECB) meeting and US jobs data due to be released later this week.

‘‘It just seems like the market is treading water ahead of the two big market event risks later on in the week,’’ Ms Lee said.

‘‘It looks like we are adjusting for yesterday. For example, yesterday, the banks were up and the miners were down and today we are just seeing the opposite.’’

12.18pm: ForexCT head of research Steven Dooley said the Aussie dollar bounced on the stronger current account balance data. It rose from $US1.0228 to $US1.0247 after the release of the current account balance.

"That will flow through in tomorrow's GDP numbers and as a result people are upgrading their expectation of GDP figures," he said.

Yet the dollar had been pulled lower only hours earlier on the news Fortescue is scrapping some production, he said.

"The iron ore issue is building a lot of momentum globally with traders thinking that it's a sign that potentially the strong support the Aussie gets from the mining boom could be getting eroded a bit." 

12.10pm: Among the sectors, financials and industrials are leading the stock falls with the indexes down 0.8 per cent. The miners, meanwhile, are up 0.4 per cent.

12.06pm: The market, meanwhile, is heading lower. The ASX200 is now down 11.6 points, or 0.3 per cent, to 4318.1.

12.03pm: As jobs are flagged to go at Rio, Prime Minister Julia Gillard is urged the mining industry to recruit Australians willing to work on projects rather than bring in temporary skilled migrants.

Ms Gillard has told a mining industry conference in Perth there are 16,000 job seekers now registered on the new Jobs Board and more than 1400 jobs to be filled in the industry.

‘‘These are hard-working Australians looking to your industry for a chance,’’ Ms Gillard has told the Association of Mining and Exploration Companies conference. ‘‘The nation as a whole is looking to you as well.

11.57am: Mining giant Rio Tinto says it will cut jobs at its Argyle diamond mine in Western Australia as it trims costs ahead of its exit from the business.

Rio is blaming rising costs and the need to achieve savings, and hasn't revealed how many jobs will go.

“Like others in the industry, Argyle is facing increasing costs," says Rio Tinto spokesman Bruce Tobin. "We are looking at ways to make savings across the business."

11.53am: NAB economist Alexandra Knight says the contribution to GDP from net exports was less than expected.

"The softening of demand from China for commodities has been more than we expected," she said. "Chinese imports have definitely softened as a flow-on of the weakness in the global economy."

"We're still expecting a solid boost in the June quarter (GDP) but we are expecting a softer outcome in the second half of this year, as commodities prices have come off.''

Patchy monthly economic data, such as retail sales and consumer confidence, will flow through to GDP, contributing to a weaker second half, she says.

"The mining boom is going into a lower gear but we still see a lot of investment in the pipeline."

11.44am: More on the trade numbers from a few moment ago: the March quarter deficit has been revised to $13 billion, down from from $14.9 billion. 

11.41am: Finance Minister Penny Wong, meanwhile, warns that there is still volatility and risk in the global economy, but says there is no better place to be than Australia.

Senator Wong recently completed an overseas trip to Washington, where the US budget remains a key issue, and also met with International Monetary Fund officials before going on to Moscow for an APEC finance ministers meeting.

‘‘In all of these meetings people were expressing their regard for Australia’s economy and their admiration for how this country had got through the global financial crisis,’’ she's told Sky News.

11.38am: Australia's current account balance has come in at a $11.8 billion deficit for the June quarter, down from $14.9 billion for the March quarter.

Of interest, though, is the fact that net exports will contribute only 0.3 percentage points to GDP growth for the quarter – half of the level economists had been expecting.

No reaction of note yet from the $A, which is at $US1.023.

11.35am: El Nino weather conditions, which can bring droughts to parts of Asia and affect crops, have emerged but will likely be weak and shortlived, New Zealand scientists say.

El Nino is a warming of sea surface temperatures in the tropical Pacific that occurs every four to 12 years and can have far-ranging effects around the globe, particularly on food output.

"Borderline El Nino conditions are present in the tropical Pacific, and a weak short-lived El Nino is predicted for the spring and summer periods," the National Institute of Water and Atmosphere says in its latest climate outlook.

It says sea surface temperatures have risen to above accepted El Nino levels, but other indicators such as the strength of trade winds are still close to normal.

The El Nino will likely "decay" in the first quarter of 2013, it adds.

11.25am: The Aussie dollar has touched a nine-week low today. It touched $US1.0223, the lowest since July 17.

11.14am: Continuing the iron ore theme of the day so far, here's an interesting view on Chinese demand. The head of junior iron ore miner BC Iron says China’s demand for the steel making commodity will pick up again under its next head of government.

BC Iron operates an iron ore joint venture in Western Australia’s Pilbara region with Fortescue Metals Group. Slowing demand from China has led to iron ore prices falling heavily in recent weeks, sparking concern about future investments in the economically important sector.

As we've noted already today, iron ore spot prices have dropped by 50 per cent from the record levels of about $US180 ($A174.70) at this time last year, and have fallen by 30 per cent over the past two months.

‘‘My view is that very little is being said of the effect of the leadership transition in China going on right now,’’ BC Iron managing director Mike Young said in a statement.

‘‘I expect that, following the election of China’s next premier Li Kequiang, you will see a loosening of monetary policy and systematic stimulus. It is no secret that China wants slower, but sustainable, growth going forward.’’

11.06am: The dollar is down on the news of Fortescue's production cut, sinking from about $US1.025 to about $US1.0224 in the space of two hours, as investors digested the implications.

The Aussie dollar, a 'commodities currency', is sensitive to the values of bulk commodities on global markets.

11am: Here's a variation from stories on the might of the 'big two' supermarkets. Boutique grocers are flourishing as shoppers take more of an interest in where their food hails from.

10.55am: Here's the Fortescue story all in one place.

10.54am: Burrell Stockbroking senior investment advisor Jamie Elgar said Fortescue could cut further projects depending on the health of the commodities market in the future.

"With the extreme volatility in the iron ore price going back so far so quick, I'm not surprised some of those fairly aggressive expansion plans would be looked at and trimmed back a little bit," he said.

"I know Fortescue had some pretty aggressive expansion plans, so if iron ore prices stay where they are or fall a little bit more, Fortescue will go back to their model and have another look and quite possibly postpone a few other things.

"It seems to be the way things are going at the moment with resource companies looking at whether projects are viable in the current market," he said.

10.50am: More on Fortescue. The cuts will result in a slight reduction to the company’s previous production guidance of 86.5 million tonnes to a new range of 82 million and 84 million tonnes including the near term ramp up of Christmas Creek and Solomon Firetail.

“The cost reductions from existing operations combined with the introduction of lowcost ore from Firetail will strengthen our position as a low-cost producer,” CEO Nev Power said in a statement to the stock exchange.

“These measures reflect the company’s ability to reduce and delay cash expenditures to meet market conditions and provide us with head room in the event of further deterioration of iron ore prices.’’

10.46am: Cameron Securities client adviser Adrian Leppinus said Australian shares opened flat after Wall Street was closed for a public holiday.

‘‘We, obviously, didn’t have any US markets last night, the European markets were generally a little bit better and the commodities were a bit better as well,’’ he said.

‘‘At the moment it’s a bit of a lacklustre day and most of it’s down to having our friends in the US not giving us much direction.’’

10.41am: Today's dip in the Goodman Fielder share price comes after the company announced it will close will close at least another 10 factories in Australia and New Zealand as it seeks $100 million in cost savings over the next three years. The company's shares lost about 1 per cent yesterday.

10.37am: And here are the early sliders on the ASX200:

  • NRW Holdings: -5.79%
  • Panoramic Resources: -2.97%
  • Myer: -2.61%
  • Whitehaven: -1.86%
  • Goodman Fielder: -1.55%

10.33am: Acrux (-2.67%), Iluka (-2.75%) and Boart Longyear (-5.61%) are all trading ex dividend today.

10.30am: Here are the leaders on the ASX200 so far. The top 10 is dominated by resources companies:

  • Resolute Mining: +4.28%
  • Kingsgate: +4.17%
  • Lynas: +4.13%
  • Mirabela: +3.85%
  • St Barbara: +3.3%

10.25am: A side note on Fortescue: its share price is down 39 per over the last 12 months, whereas the iron ore price, which traded just above $US180 this time last year is down 50 per cent.

10.23am: Here's how the various sub indices of the ASX200 are performing this morning:

  • Materials: +0.9%
  • Info tech: +0.4%
  • Energy: +0.35%
  • Consumer staples: +0.2%
  • Health: -0.5%
  • Utilities: -0.47%
  • Telecoms: -0.26%

10.20am: Fortescue shares are 2.25 per cent higher, or 8 cents, to $3.64 following the announcement of capital expenditure reduction and cuts to staff and operating costs.

10.15am: In early trade, the All Ordinaries index is 1.8 points lower to 4349.8, while the benchmark S&P/ASX200 is 2.9 points lower, or 0.1 per cent, to 4326.8.

10.14am: More on Fortescue. It will also defer the development of the Kings deposit within its Solomon mining hub in WA’s Pilbara region, and the full completion of its fourth berth at Herb Elliott Port. But Fortescue has confirmed its commitment to complete the expansion of its Christmas Creek mine.

10.11am: BREAKING There is some Fortescue news filtering through. It looks like the company is trimming staff numbers and operating costs to save about $300 million. And it looks like capital expenditure is being cut by about a quarter. More details soon.

10.06am: Early take - shares flat. No decisive move in either direction as markets open.

9.58am: Looking at what’s ahead on the markets today, CMC’s Ric Spooner says ‘‘traders are wary of committing much more to share markets prior to any announcement on the ECB’s plans to prevent a further blow out in Spanish and Italian bond yields’’. In a note this morning he wrote:

The Australian market looks set for a steady days trading as investors wait on the outcome of Thursday’s ECB meeting.

The local market’s tone today will be supported by the ongoing rally in commodities such as oil and silver in response to the prospect of further monetary easing. There has also been minor relief on the iron ore market which has shown some signs of steadying at around $90 per tonne in recent days.

9.55am: Australian bond futures prices have moved to fresh one-month highs ahead of the central bank’s September interest rate decision. Nomura interest rate strategist Martin Whetton said bond futures movement followed the release of weaker European manufacturing data.

Mr Whetton said the Reserve Bank of Australia’s monthly board meeting and interest rate decision would determine the bond market’s direction on Tuesday.

‘‘We are looking for the (RBA cash) rate to be unchanged and for the accompanying statement to be a little more dovish and reflect the weakness in China,’’ he said.

‘‘Therefore, we’d expect a continuation of the recent rally in the market.’’

At 8.30am the September 10-year bond futures contract was trading at 97.035 (implying a yield of 2.965 per cent), up from at 97.020 (implying a yield of 2.980 per cent) yesterday. Earlier, the contract hit a one-month high of 97.085 (2.915 per cent).

9.52am: Some analyst rating changes for today:

  • New Hope cut to 'neutral' from 'outperform' at Credit Suisse
  • Arrium cut to 'equal-weight' at Morgan Stanley
  • Grange Resources downgraded to 'neutral' at UBS
  • OceanaGold raised to 'buy' at Goldman Sachs
  • Western Areas NL cut to 'sell' at Goldman Sachs

9.47am: While we're on the subject of miners and iron ore, Rod Myer's technical analysis column today looks at Fortescue. He writes:

This week Paul Ash, Victorian president of the Australian Technical Analysts Association, looks at the Fortescue share price. He says there is still some headroom for the company in the iron ore price given its cost of production is $US49 a tonne, and observes its share price hasn't closed on a weekly basis above $7 since 2008. Since a spike in January 2011, the price has drifted sideways or down, as witnessed by the downward trend on the 30-day moving average line on the chart. Full story.

9.45am: Iron ore miners will remain under pressure again today after the iron ore price lost another 0.34 per cent to $US89.10. Rio and BHP did not trade overnight because of the US public holiday.

As BusinessDay’s Clancy Yeates notes this morning, the Australian Bureau of Statistics released data yesterday sghowing that spending on exploration in the June quarter fell by $53 million to $1.02 billion after hitting a record high in March. The decline - the first since June 2009 - was driven by weaker activity in the mining states of Queensland and Western Australia.

9.38am: It's all about rates today. The RBA meets to decide on official interest rates and they widespread pick is for no change. All 24 economist surveyed by Bloomberg expect the board of the RBA to keep rates at 3.5 per cent.

9.34am: For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:

  • SPI futures are 9 points lower at 4345
  • The $A is lower at $US1.0247
  • In the US, markets were closed for a holiday
  • In Europe, the FTSE rose 0.82% to 5758.41
  • Gold rose $7.30 to $US1694.90 an ounce
  • WTI crude oil rose 58 cents to $US97.05 a barrel

9.32am: With US markets closed for a public holiday, Aussie stocks take their leads from European markets which gained on hopes that the ECB will this week announce a bond-buying program. which is those leads are soft.

The ECB is expected to unveil details of a plan to buy bonds from Spain and Italy to lower the two countries' borrowing costs and ease the region's debt crisis.

Overnight, ECB President Mario Draghi was reported as saying that the purchase of sovereign bonds with a maturity of up to three years by the central bank would not breach EU rules, easing worries about the plan's potential hurdles.

9.30am: Morning all. Welcome to the Markets Live blog for Tuesday.

This blog is not intended as investment advice

BusinessDay with agencies