K: Financial and Insurance Services

Tech, financials in sea of red as world awaits US earnings

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Original article by David Rogers
The Australian – Page: 17 & 28 : 16-Oct-18

Bearish investor sentiment again weighed on Asian sharemarkets on 15 October, which followed the Australian bourse further into negative territory. Richard Coppleson of Bell Potter expects global markets to follow the historical trend for October, whereby sharp sell-offs are usually followed by a strong recovery in the final months of the year. However, he adds that the Australian sharemarket is unlikely to rebound strongly until there is evidence that Wall Street’s latest sell-off was merely a correction.

CORPORATES
BELL POTTER SECURITIES LIMITED, STANDARD AND POOR’S ASX 200 INDEX, HANG SENG INDEX, SHANGHAI COMPOSITE INDEX, NIKKEI 225 INDEX, JANUS HENDERSON GROUP PLC – ASX JHG, UNITED STATES. EXECUTIVE OFFICE OF THE PRESIDENT, JP MORGAN AND COMPANY INCORPORATED

Investors brace for another volatile week

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Original article by Perry Williams
The Australian – Page: 19 : 15-Oct-18

Futures pricing suggests that Australian equities will fall when the local sharemarket opens on 15 October. The S&P/ASX 200 shed 4.7 per cent in the previous week, despite a modest gain on 12 October, and Shane Oliver of AMP Capital says there is a high risk of a further correction in the short-term. The Dow Jones Industrial Average also clawed back some of its losses on 12 October, after shedding 1,300 points in the previous two trading sessions.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, AMP CAPITAL INVESTORS LIMITED, DOW JONES INDUSTRIAL AVERAGE INDEX, UNITED STATES. FEDERAL RESERVE BOARD, UNITED STATES. EXECUTIVE OFFICE OF THE PRESIDENT, RESERVE BANK OF AUSTRALIA, TD SECURITIES, FARR, MILLER AND WASHINGTON LLC

AUD subdued on Friday after tumultuous week. AFEX Monday update – October 15, 2018

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It was a mixed week for the Australian dollar with turmoil in equity markets weighing heavily mid-week, but a recovery ensued enabling the AUD to settle back above 0.7100 at the close on Friday.

All appeared ok in the markets early in the week, but on Wednesday in the US investors quickly shifted into overdrive and ditched their equity holdings.  The appeal of risk-free bond yields at 7-year highs appeared the key catalyst.  With equities down over 3% in the session, currency traders flocked to the safe havens of the Japanese yen, Swiss franc and US dollar – leaving the risk-currencies like the AUD completely out of favour as traders rushed to the exits.

The Australian dollar fell from 0.7130 at 4.30pm on Wednesday to 0.7043 at 7.30am on Thursday, a 1.2% swing.  But as quickly as the sell-off happened, by 11.30pm Thursday night it had fully recovered and spent the remainder of the week grinding sideways to close at 0.7110.

The AUD also lost ground against the EUR.  For a while there on Thursday AUD/EUR touched its lowest level since August 2015 at 0.6112, a far cry from the 0.7300 level where it traded in February 2017.  It managed to bounce higher off the lows to close the week out at 0.6151.

It was a similar story for the AUD/GBP, where on Thursday it traded at the lowest level since June 2016 at 0.5335.  However it also managed a recovery, closing the week at 0.5404.

The week ahead is quite busy on the economic front.  In the US, retail sales lead the way on Monday night, followed by the Fed meeting minutes on Thursday night.  Throughout the week there are also a host of speeches by Fed members.  Locally we have the RBA publishing their meeting minutes on Tuesday, followed by employment data on Thursday.  In the UK, highlights include employment data on Tuesday, CPI on Wednesday and retail sales on Thursday.  In addition, the Brexit negotiations will be a key factor in how the sterling trades this week and US treasuries and the US/China trade tiff will be key determinants on how the USD trades.

Given the plethora of economic data and political events this week, no doubt we are in for another volatile week ahead in the currency markets.  Expected weekly trade ranges:

  • AUD/USD:  0.7040 – 0.7215.  Neutral bias
  • AUD/EUR:  0.6110 – 0.6180.  Neutral bias
  • AUD/GBP:  0.5330 – 0.5520.  Bullish bias

I’m expecting the sterling to be the key trade this week.  Given Brexit negotiations appear to have missed the deadline for the EU’s October meeting, there could be some negativity towards the GBP as a result.  This could help AUD/GBP recover in the short-term.

James King
Head of FX Dealing. AFEX
www.afex.com

CBA abusing the law fighting customers: Labor

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Original article by James Eyers
The Australian Financial Review – Page: 19 : 12-Oct-18

Commonwealth Bank of Australia CEO Matt Comyn appeared before the House of Representatives economics committee on 11 October. He admitted that the misconduct exposed by the financial services royal commission had hurt some customers, and said CBA is changing its organisational culture in the wake of the scandals that have rocked the bank. Labor MP Clare O’Neil criticised CBA’s approach to dealing with customers’ complaints, including the use of aggressive litigation tactics.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA. HOUSE OF REPRESENTATIVES STANDING COMMITTEE ON ECONOMICS, AUSTRALIAN LABOR PARTY, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, LIBERAL PARTY OF AUSTRALIA

Trump blames crazy Fed for rout

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Original article by Vesna Poljak, Sarah Turner, Michael Smith, Jacob Greber
The Australian Financial Review – Page: 1 & 29 : 12-Oct-18

The Nasdaq shed more than four per cent on 11 October, as global sentiment toward equities turned bearish. President Donald Trump has linked the global sell-off to the Federal Reserve’s recent decision to increase official interest rates, telling reporters that the central bank is "making a mistake" and it has "gone crazy". Simon Doyle of Schroders says US markets are likely to experience a further big fall, citing factor such as high valuations, rising interest rates and the US-China trade war.

CORPORATES
NASDAQ COMPOSITE INDEX, UNITED STATES. EXECUTIVE OFFICE OF THE PRESIDENT, UNITED STATES. FEDERAL RESERVE BOARD, SCHRODER INVESTMENT MANAGEMENT AUSTRALIA LIMITED, NETFLIX INCORPORATED, AMAZON.COM INCORPORATED, ADOBE CORPORATION, STANDARD AND POOR’S ASX 200 INDEX, HANG SENG INDEX, NIKKEI 225 INDEX, WISETECH GLOBAL LIMITED – ASX WTC, APPEN LIMITED – ASX APX, FEDERATION ASSET MANAGEMENT, MACQUARIE GROUP LIMITED – ASX MQG

CBA faces first suit over low returns

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Original article by Michael Roddan
The Australian – Page: 21 : 11-Oct-18

The Commonwealth Bank of Australia has indicated that it will "vigorously" defend a class action launched by Slater & Gordon. The law firm contents that wealth manager Colonial First State had invested its superannuation clients’ money in CBA-owned funds that had very low returns, when it could have invested the money in higher-returning funds controlled by CBA or other banks. Other banks and financial institutions have also been targeted by class action lawyers in the wake of the financial services royal commission.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, COLONIAL FIRST STATE GROUP LIMITED, SLATER AND GORDON LIMITED – ASX SGH, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, COMMONWEALTH FINANCIAL PLANNING LIMITED, BW FINANCIAL ADVICE, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, MLC LIMITED, AMP LIMITED – ASX AMP, MAURICE BLACKBURN PTY LTD

Bank CEOs to face off with fired-up MPs

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Original article by James Frost
The Australian Financial Review – Page: 17 : 11-Oct-18

Liberal MP Tim Wilson, who chairs federal parliament’s standing committee on economics, says bank CEOs can expect to face a grilling when they front the committee in coming days. He says that amongst other things, the committee will be demanding information on how the major banks intend to address governance concerns and compensate customers for misconduct. Commonwealth Bank CEO Matt Comyn and Westpac CEO Brian Hartzer will appear before the committee on 11 October.

CORPORATES
AUSTRALIA. HOUSE OF REPRESENTATIVES STANDING COMMITTEE ON ECONOMICS, LIBERAL PARTY OF AUSTRALIA, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AMP LIMITED – ASX AMP, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIAN LABOR PARTY, AUSTRALIAN BANKING ASSOCIATION, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION, AUSTRALIAN GREENS, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

Rio reverse reveals investor ire on pay

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Original article by Patrick Durkin
The Australian Financial Review – Page: 15 : 10-Oct-18

Rio Tinto has advised that it will not proceed with plans to adopt a new executive remuneration model after meetings with key shareholders indicated that it was unlikely to secure sufficient support from investors. A number of Australian-listed companies have adopted so-called hybrid remuneration structures, including Telstra, AMP and Wesfarmers. However, investors have raised concerns about the hybrid model, and the issue has attracted scrutiny by the financial services royal commission.

CORPORATES
RIO TINTO LIMITED – ASX RIO, TELSTRA CORPORATION LIMITED – ASX TLS, AMP LIMITED – ASX AMP, WESFARMERS LIMITED – ASX WES, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, QBE INSURANCE GROUP LIMITED – ASX QBE, PERPETUAL LIMITED – ASX PPT, JB HI-FI LIMITED – ASX JBH, ISENTIA GROUP LIMITED – ASX ISD, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, INSTITUTIONAL SHAREHOLDER SERVICES INCORPORATED, AUSTRALIAN SHAREHOLDERS’ ASSOCIATION, AUSTRALIA. FUTURE FUND MANAGEMENT AGENCY, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

Banks to end charging dead, conflicted fees

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Original article by James Frost
The Australian Financial Review – Page: 13 & 17 : 10-Oct-18

The Australian Banking Association has proposed a number of changes to the banking code of practice in response to the misconduct exposed by the financial services royal commission. Amongst other things, banks have agreed to take action to ensure that they do not continue to charge fees after a customer has died, while the banks will ensure that they do not charge fees for services that are not provided or are not needed by a customer. The ABA and its members will also lobby for the complete abolition of trailing commissions for financial advice.

CORPORATES
AUSTRALIAN BANKING ASSOCIATION, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AMP LIMITED – ASX AMP, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, MACQUARIE PRIVATE WEALTH MANAGEMENT PTY LTD, CLSA AUSTRALIA PTY LTD, COMMONWEALTH FINANCIAL PLANNING LIMITED, COUNT FINANCIAL LIMITED, FINANCIAL WISDOM LIMITED, COLONIAL FIRST STATE GLOBAL ASSET MANAGEMENT

Bidders are swinging hard for assets in M&A frenzy

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Original article by Joyce Moullakis
The Australian Financial Review – Page: 17 : 10-Oct-18

Data from Dealogic shows that some $US88bn ($124bn) worth of mergers and acquisitions have been announced in Australia so far in 2018. This compares with $US89.3bn for the whole of 2017. Bankers and lawyers expect M&A activity to remain strong, with cashed-up local private equity firms competing with foreign players. Recently announced M&A transactions include KKR’s bid for MYOB and Affinity Equity Partners’ deal to buy Scottish Pacific Group.

CORPORATES
DEALOGIC (AUSTRALIA) PTY LTD, KKR AND COMPANY LP, MYOB GROUP LIMITED – ASX MYO, AFFINITY EQUITY PARTNERS (AUSTRALIA) PTY LTD, SCOTTISH PACIFIC GROUP LIMITED – ASX SCO, PACIFIC EQUITY PARTNERS PTY LTD, LIFEHEALTHCARE GROUP LIMITED, NEXTDC LIMITED – ASX NXT, ASIA PACIFIC DATA CENTRE GROUP – ASX AJD, APA GROUP – ASX APA, CHEUNG KONG INFRASTRUCTURE HOLDINGS LIMITED, AUSTRALIA. FOREIGN INVESTMENT REVIEW BOARD, TRANSURBAN GROUP LIMITED – ASX TCL, WESTCONNEX, WESTFIELD CORPORATION, MINTER ELLISON, SIRTEX MEDICAL LIMITED, CDH INVESTMENTS FUND MANAGEMENT COMPANY, GREENHILL AND COMPANY, NM ROTHSCHILD AUSTRALIA HOLDINGS PTY LTD, WESFARMERS LIMITED – ASX WES, UBS HOLDINGS PTY LTD, MORGAN STANLEY AUSTRALIA LIMITED, MACQUARIE CAPITAL PTY LTD