Markets Live: Dollar jumps on RBA 4:12pm: The Australian dollar is rallying after the Reserve Bank left interest rates at a record low, as widely expected, but surprised some market players by not giving a clear signal it could ease again. The Aussie jumped nearly threee-quarters of a cent to a session peak of 90.48 US cents, while cash bonds sold off as markets modestly lowered the chances of further interest rate cuts. Interbank futures also fell, giving a 60 per cent chance of another cut by December, from 68 per cent before the RBA rate decision. Markets sold off and the Aussie dollar is going higher. The market took it as a hawkish development," says Matthew Johnson, a rate strategist at UBS. " (But) I think the RBA is keeping its options open and the market is over-reacting," he says, seeing at least one more easing next year. 4:07pm: Some more on Microsoft's filleting of Nokia: The deal is not only about phones. Bundled up in Nokia's patents and expertise is the promise of a better grip on a market increasingly turning to mobile devices from PCs. Tablets, phablets (larger screen phones, smaller than tablets) and smartphones are overtaking PCs, historically Microsoft's main game. This puts the outlook for Microsoft's cash-cow, the Windows operating system for PCs, under unprecedented pressure. Foad Fadaghi, research director at Australian research firm Telsyte, says the deal is a chance for Microsoft to mimmick Apple in developing integrated hardware and software to better suit the market. "They'll be controlling the software and the hardware, it's a more integrated approach of developing them together," Fadaghi says. It might put the company in a better position to compete as consumers shift from PCs to mobile devices. 3:57pm: Switzerland's economy has defied the recession that afflicted its neighbours to notch up a year of uninterrupted growth, underlining the importance of the country's currency ceiling as it marks its second anniversary. Swiss gross domestic product rose 0.5 per cent in the second quarter, topping forecasts of 0.3 per cent growth and up from three months through March, when it expanded by 0.6 per cent. Since the Swiss National Bank set a cap on the franc of 1.20 per euro two years ago, the economy has seen only a single quarter of contraction, while the debt-plagued euro area only emerged from 18 months of recession last quarter. ""It's a clear success - they achieved what they wanted,"" minimising deflation risks, says Daniel Hartmann, an economist at Bantleon Bank in Zug. ""At the beginning the step was met with much skepticism. There were worries the cap wouldn't be manageable, that it would fail or the SNB would have to buy lots of euros and was exposing itself to huge losses."" 3:37pm: Qantas has ditched plans to add a near-new Boeing 747 freighter aircraft to its fleet, due to continued weakness in the international air-cargo market. 3:30pm: If the market is looking for disappointment then Australia is probably the place to find it, says IG's Chris Weston: Retail sales gained 0.1% in August, which was not only below the 0.4% expected from economists, but was the fifth month in a row it missed forecasts and this included the one-off "school kids" bonus. It's clear the consumer is not spending, despite confidence improving and this was seen in department stores sales falling 8%. We also saw the Q2 balance of payments highlighting a 7% increase in the deficit to $9.35 billion, representing 2.4% of GDP. We also know net exports won't contribute towards tomorrows GDP and while the consensus is for 0.6% for the quarter, however given today's data, one gets the sense this print could come in closer to 0.2%. The RBA won't cut again now until at least November, and looking at the OIS market, the chance of a cut in November has lowered on the back of this statement. We think that is unwise and after tomorrow's weak Q2 GDP read, a couple of poor employment reports and a weak CPI print on October 23 the probability of a November cut should increase. The irony of the whole situation is the higher the AUD, the more likely the RBA to cut in the future. 3:27pm: We apologise - some of our recent posts weren't sent live. The Reserve Bank board may not come out and say it directly, but it is clearly waiting for the election to get out of the road, says CommSec chief economist Craig James: That way it can more accurately gauge what shape the economy is in, and - after a period of time - determine how consumers, investors and businesses are responding to previous rate cuts. interest rates are already low enough to foster solid, sustainable normal "growth" of the economy. The only two factors that have held back the economy over the past six months are political uncertainty and softness of the global economy. On Saturday the political uncertainty will hopefully be resolved. And the global economy is already showing more encouraging signs, especially the US and Chinese economies. The minutes of the August RBA Board meeting were exceptionally clear about the decision to cut interest rates and how this should be communicated: "Regarding the communication of this decision, members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further. The Board would continue to examine the data over the months ahead to judge whether monetary policy was appropriately configured. In other words, the Reserve Bank remains open to the idea of further rate cuts, but it has no intention of cutting rates any time soon. And most observers would view that as eminently sensible given business reluctance to spend or employ on the one hand, and investor keenness to buy and build homes on the other hand. 3:26pm: Rural lender Gippsland Secured Investments has been placed into receivership. A spokesman from Ernst & Young said Adam Nikitins and Simon Cathro had been appointed receivers by the trustee, and had taken control of the company and its management as of noon today. It is understood the lender has closed its doors at its headquarters in Bairnsdal. 3:25pm: Here are some more economist comments on today's rates non-event: The most relevant guidance we had were in the minutes of the previous meeting a couple of weeks ago which suggested there is still an easing bias, although that was very hard to extract from today's comments. We're saying that the cash rate at 2.5 per cent is the low and we're describing the RBA as reluctant rate cutters. They prefer the easing to come through a lower currency, rather than through lower rates. But if the unemployment rate keeps trending up and we get another low CPI reading, then I imagine come Melbourne Cup day (November 5) we will all be debating whether they'll be going to cut rates or not. The statement that came with the decision is very close to what we've seen in the past few months. It's almost an 'as you were' statement. Obviously the lower the currency goes, the less work they'll have to do over the long run. But the most important part of the currency here is what it will do for inflation and how much scope that will provide the board over the longer term. They do note explicitly that even allowing for the decline we have seen over the past few months, inflation will remain in the territory that will allow them to provide support if need be. After the (current account) numbers today, we think GDP will print at 0.2 (percent). We did have 0.4 before the data. If we are right on that forecast, then the RBA will have to downgrade their assessment for growth this year and perhaps next year. And that's conducive to a further rate cut down the line. There is no great surprise really. A very short statement covers a lot of very similar themes, no real new information. They continue to talk about below-trend growth, exchange rate a bit lower but still high, monetary policy that continues to support asset prices as well as retail spending, so really no additional guidance. I guess the final paragraph is very neutral in its tone. We are a few days away from the election as well, I think it is probably a deliberately short, clean statement. We expect them to deliver a final cut either in November or December, but there is very little forward guidance at today's statement. 2:35pm: Here's the full statement by RBA governor Glenn Stevens, explaining today's decision: At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent. Recent information is consistent with global growth running a bit below average this year, with reasonable prospects of a pick-up next year. Overall, global financial conditions remain very accommodative, though the recent reassessment by markets of the outlook for US monetary policy has seen a noticeable rise in sovereign bond yields, from exceptionally low levels. Volatility in financial markets has increased and has affected a number of emerging market economies in particular. Notwithstanding the higher volatility, Australian institutions have ample access to funding markets. In Australia, the economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment. The unemployment rate has edged higher. Inflation has been consistent with the medium-term target. With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the recent depreciation of the exchange rate. The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values, and further effects can be expected over time, including from the declines in rates seen over recent months. The pace of borrowing has remained relatively subdued, though recently there are signs of increased demand for finance by households. The Australian dollar has depreciated by around 15 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy. At today's meeting, the Board judged that the setting of monetary policy remained appropriate. 2:28pm: Here's a comment on the Microsoft-Nokia deal: ""Both Nokia and Microsoft really missed the boat in terms of smartphones, and it is extremely difficult to claw your way back from that,"" says Paul Budde, a Sydney-based telecommunications consultant. 2:08pm: Under the terms of the deal with Nokia, Microsoft will take over all of Nokia's devices and services business, including the mobile phones and smart devices business units. Nokia Lumia's smartphone, which runs Windows Phone 8. 1:54pm: China's services sector grew steadily in August as domestic demand picked up, official data showed today, adding to signs that government measures have started to steer the world's second-largest economy out of its longest slowdown. The non-manufacturing purchasing managers' index (PMI) dipped slightly to 53.9 last month from July's 54.1 to be at the same level as in June, the National Bureau of Statistics said. A reading above 50 indicates activity in the sector is accelerating, while one below 50 points to a slowdown. The survey followed a pair of manufacturing PMIs which showed factory activity accelerated in August. The non-manufacturing sector grew steadily in August. The rise in new orders set a good foundation for growth in the next few months," said Cai Jin, a vice head of the China Federation of Logistics and Purchasing (CFLP), which compiles the index on behalf of the NBS, said in a statement. 1:42pm: Japan will tell G20 nations at a summit this week that it will proceed with a planned two-stage sales tax hike, and consider compiling an extra budget for fiscal spending to ease the pain on the economy, Finance Minister Taro Aso said today. Aso, who will accompany Prime Minister Shinzo Abe to the Group of 20 summit in Russia, also said Japan is unlikely to face criticism from other countries this time about the yen's weakness that boosts the competitive advantage of its exports. Japan has launched fiscal and monetary stimulus to pull out of deflation. The yen's weakness was only a side-effect of that ultimate goal of beating deflation," Aso told a news conference after a regular cabinet meeting. Japan has pledged at previous G20 gatherings that it will make efforts to rein in its ballooning public debt which, at double the size of its $5 trillion economy is the biggest among major industrialised nations. 1:24pm: We're just hearing via Bloomberg that Nokia boss Stephen Elop is leaving the Finnish mobile phone company for ... Microsoft. Elop will step down to head Nokia's core business, devices and services, which Microsoft will acquire for 5.44 billion euro ($8 billion). This is also interesting as the former Microsoft executive Elop has been touted as a candidate to replace current chief executive Steve Ballmer when he steps down next year. UK online gambling site Ladbrokes considered him a 5-1 favourite to run the software giant. 1:17pm: Another ammonia leak has occurred at chemical giant Orica's Kooragang Island plant in Newcastle. It's the latest in a string of toxic leaks at the site where ammonium nitrate production was shut down in 2011 because of the problem. Fire crews were called to the plant at 7.15am today, about three hours after ammonia vapour escaped from a pipe flange containing 100 kilograms of the liquid chemical. NSW Fire and Rescue Inspector Greg Symonds told AAP that crews had suppressed the ammonia with a stream of water. A 50-metre wide safety ""hot zone"" was established, but air tests had confirmed the danger was well contained, Insp Symonds said. ""We have a zero reading for any ammonia gas from 30 metres away,"" he said. ""There have been no evacuations and there is no offsite impact."" Fire crews will redirect the liquid ammonia to another pipeline before handing control back to Orica personnel. 12:54pm: The always interesting William Pesek has weighed in on the Australian election: It's a bit of a Seinfeld moment. 12:43pm: Companies with a plan to innovate would be guaranteed a slice of a $72 billion pie over the next four years under a re-elected Labor government. Industry Minister Kim Carr on Tuesday announced Labor's ""innovation guarantee"." ""If you have a plan to innovate, we will back you,"" Senator Carr said. Labor's figures show the total government innovation, science, technology and research spend over the forward estimates will total $72 billion. While the figure includes the budgets of agencies such as CSIRO and the Australian Nuclear Science and Technology Organisation, new measures in the plan include a national innovation council and a $25 million program to help businesses bid for government tenders. Senator Carr said the national innovation council would be a peak body to ensure science and research investment was paying off in terms of new jobs and technologies. 12:31pm: Receivers have been appointed to a Nathan Tinkler-linked firm Aston Metals Group. Aston Metals is an unlisted copper explorer with tenement holdings in the Mount Isa region of northwest Queensland, Australia. The receivers were appointed by Madison Pacific Trust Limited in its capacity as Security Trustee over all the secured property of Aston Metals. The Walford Creek copper, lead and zinc deposit is the primary focus of Aston Metals. FTI Consulting will review the status of all projects owned by Aston Metals as part of their appointment with a view to offering them for sale. During a liquidators examination earlier this year it was revealed the Tinkler Group Family Trust owned Aston Metals. 12:18pm: Here's a little bit more on retail sales, RBC Capital Markets senior economist Su-Lin Ong said the likely sub-trend pace of economic growth in the June quarter is continuing into the September quarter. ""We were particularly surprised by the weakness in retail sales,"" she said. ""We had thought the school kids bonus would boost retail activity, but that was not the case. ""It was another disappointing result, sales themselves remain pretty lacklustre.""When you look at the breakdown, you can see weakness in some key categories, particularly department stores."" 12:08pm: The RBA is running out of room to implement emergency stimulus measures should they be needed with interest rates now at historical lows, Shadow Finance Minister Andrew Robb said. The central bank doesn't have ""a lot of room left if there was some other unforeseen event in the world economy to make a difference,"" said Robb. ""The Reserve Bank has been relied upon, or pressured, to do the heavy lifting in the economy for the last few years."" RBA Governor Glenn Stevens, who will announce the central bank's monthly monetary policy decision today, has cut rates by 2.25 percentage points since November 2011 to a record-low 2.5 per cent. Stevens will keep Australia's benchmark rate at 2.5 per cent in his announcement scheduled for 2.30pm, according to all 32 economists in a Bloomberg News survey. 11:57am: Japanese summer bonuses rose in July from a year earlier, government data showed, boding well for personal consumption and adding to signs the benefits of Prime Minister Shinzo Abe's reflationary policies are broadening. Wage earners' special payments, which are predominantly summer bonuses, rose 2.1 per cent in July from a year earlier, data from the labour ministry showed today. That followed a revised 2.1 per cent gain in June, suggesting that companies are now confident enough about the economic outlook to pass on some of their rising revenues to employees. The rise in bonuses will be encouraging to Abe, who hopes his "Abenomics" policy prescription of aggressive monetary and fiscal stimulus and pro-growth reforms will create a virtuous circle of consumption, bigger corporate profits, investment and higher wages that ultimately revitalises growth. The Bank of Japan considers wage growth as crucial in its battle to beat deflation and meet its pledge of achieving 2 per cent inflation in roughly two years. It is widely expected to keep monetary policy steady this week following its April launch of a massive stimulus program. 11:39am: The Australian dollar has fallen about a quarter of a cent to 89.95 US cents on the release of the retail sales and current account deficit numbers. 11:29am: The worst is over for Asian emerging markets after investors pulled billions of dollars last month on concern the US Federal Reserve will start cutting back bond purchases, according to Nomura Holdings. ""We're through the worst of the crisis but it doesn't mean individual countries won't continue to suffer significant challenges,"" said Steve Ashley, London-based head of global markets at Nomura. ""We remain relatively positive on the longer term performance of risk assets in Asian emerging markets."" The outlook for Asian emerging markets remains ""very positive"" over the next five to 10 years as the amount of investments by funds in these countries will likely have to catch up with the growing size of their economies, Ashley said. The market capitalization of shares traded in China accounts for 37 per cent of the nation's gross domestic product, compared with 107 per cent for stocks in the US, according to data compiled by Bloomberg. The proportion is 45 per cent for Indonesia, 69 per cent for the Philippines and 54 per cent for India, the data show. The International Monetary Fund in July predicted the economies of developing Asia will expand 6.9 per cent this year and 7 per cent next year. 11:00am: Check out this background piece on the Vodafone-Verizon deal. It definitely looks like it pays to go to the gym: In the end, all it took was a workout session in the gym followed by conversation over breakfast at San Francisco's Four Seasons hotel for Verizon Communications' Lowell McAdam and Vodafone Group's Vittorio Colao to bridge a $US30 billion, 10-year-long gap between their companies and strike the third-biggest corporate deal ever. The two CEOs, who have known each other for 20 years and are close enough to have had dinner at each other's homes, had been in regular touch at least since the fall of last year about the fate of their Verizon Wireless joint venture, which was formed in 2000 and is now the No. 1 US mobile carrier. In an interview on Monday, McAdam said that he and Colao determined early on that they did not want to merge Vodafone and Verizon into one global telecom behemoth. The alternative - for Verizon to buy out Vodafone's 45 percent stake in Verizon Wireless - was more attractive. But the question was: at what price? In April, sources told Reuters that Verizon was opening the gambit with a roughly $US100 billion proposal. In late July, McAdam was discussing the matter on the phone with Colao, who was calling in from Australia. Colao suggested they should meet face-to-face and then flew over to San Francisco two days later, as McAdam was there for a business trip. We got up early. We were both down at the gym together, we had a brief conversation on the exercise bicycle," McAdam said, adding they continued to talk over breakfast that morning. 10:47am: NSW is poised for a new era of economic growth, a state government report says. Deputy Premier and Trade and Investment Minister Andrew Stoner released the Progressing the NSW Economic Development Framework report at the state's inaugural Business Leadership Forum in Sydney on Tuesday. ""Despite the impact on business of uncertainty in Canberra, a relatively high Australian dollar and slower growth in the global economy, NSW industry has proven its resilience,"" he said. The report looked at the state's performance for 2013 in professional services, manufacturing, international education and research, the digital economy, creative industries and the visitor economy. Mr Stoner said the report came after research by ANZ in August showed NSW's economic diversity meant it wouldn't be affected by the anticipated slowdown in mining and would be central to the nation's growth in coming years. ""ANZ's analysis also showed that anticipated recovery in the US economy will benefit NSW most, given our economic profile more closely matches that of the US, and that the majority of multinational companies in Australia choose Sydney as their base,"" he said. 10:24am: The competition regulator has approved Virgin Australia extending its alliance with Air New Zealand on the trans-Tasman route for another five years - two years longer than it had originally proposed. Releasing its final decision today, the Australian Competition and Consumer Commission said the alliance between the two airlines was ""likely to result in material public benefits"." ""The alliance will allow the two airlines to offer enhanced products and services, such as new frequencies and increased access to loyalty program benefits and lounges,"" ACCC commissioner Jill Walker said today. ""This is likely to promote competition on trans-Tasman routes, particularly for business travellers."" The competition regulator pointed out that Virgin's operations between Australia and New Zealand would be ""more limited than its key competitors"" without the alliance. Virgin shares are flat at 40.5 cents. 10:03am: EXCLUSIVE: A controversial $200 million wind farm that divided a local community and drew opposition from a nearby maximum security jail has secured planning approval to proceed. Infigen Energy's 33 turbine wind farm planned for Bodangora, near Dubbo in central NSW, was approved by the state's Planning Assessment Commission late last week with the ruling only made public on Monday. In a potential setback to opposition at other proposed wind farm sites, the commission dismissed community concerns that noise from the turbines would affect their health. The commission said NSW Health "was very clear in its advice" that "there is no published scientific evidence to link wind turbines with adverse health effects." While NSW Health found that noise from the turbines "may cause some disturbance" to those living within 700 metres of the towers, it found the planned two-kilometre buffer zone to be "highly conservative" and "a very precautionary approach." Wind Photo: Jay Cronan 9:44am: Strong economic data out of Europe last night is what is holding SPI futures up at the moment. Photo: Bloomberg 9:32am: Good morning. Welcome to the Markets Live blog for Tuesday.