K: Financial and Insurance Services

Aussie 10-year bond yield drops below 1pc

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Original article by Patrick Commins, Vesna Poljak, Jonathan Shapiro
The Australian Financial Review – Page: 13 & 27 : 7-Aug-19

The fallout from the escalating trade and currency war between the US and China has seen the yield on Australian 10-year government bonds fall below the cash rate for the first time. The bond yield reached a record low of 0.968 per cent on 6 August, before rising to 1.047 per cent late in trading. Meanwhile, the futures market has priced in an 0.25 per cent reduction in the cash rate by October, after the Reserve Bank left official interest rates unchanged at one per cent at its monthly board meeting.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, QIC LIMITED, ARDEA INVESTMENT MANAGEMENT PTY LTD, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, UNITED STATES. DEPT OF THE TREASURY, PEOPLE’S BANK OF CHINA, EXANTE DATA

Big four lending at record low as competition bites

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Original article by Duncan Hughes
The Australian Financial Review – Page: 3 : 6-Aug-19

Analysis by Morgan Stanley suggests that smaller Australian banks and non-authorised deposit-taking institutions are enjoying stronger growth in mortgage lending than the nation’s four largest banks. The ‘big four’ are attempting to counter this by offering incentives and aggressively reducing their interest rates, but some of the smaller lenders are matching these offers. Meanwhile, data from Australian Finance Group shows that the market share of non-bank lenders rose to a record 42 per cent in the June quarter.

CORPORATES
MORGAN STANLEY AUSTRALIA LIMITED, AUSTRALIAN FINANCE GROUP LIMITED – ASX AFG, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, WESTPAC BANKING CORPORATION – ASX WBC, ME BANK, BENDIGO BANK, CANSTAR PTY LTD, THINKTANK, THE BLACKSTONE GROUP LP, LA TROBE FINANCIAL PTY LTD

CBA sets banking tone with profit pressure

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Original article by Cliona O’Dowd
The Australian – Page: 17 & 20 : 5-Aug-19

The consensus of analysts polled by Bloomberg is that the Commonwealth Bank of Australia will post a 2018-19 cash profit of $8.76bn, which would be seven per cent lower than previously. Jonathan Mott of UBS estimates that CBA has about $5bn in excess capital after completing the sale of Colonial First State Global Asset Management. He says that rather than announcing a special dividend, the bank should retain some capital until the outcome of the New Zealand Capital Review is known. Mott recently downgraded his recommendation on CBA’s stock to ‘sell’. AMP and Suncorp are among the other companies that will issue earnings reports in coming days.

CORPORATES
COMMOTION SYSTEMS, BLOOMBERG LP, UBS HOLDINGS PTY LTD, COLONIAL FIRST STATE GLOBAL ASSET MANAGEMENT, AMP LIMITED – ASX AMP, SUNCORP GROUP LIMITED – ASX SUN, INSURANCE AUSTRALIA GROUP LIMITED – ASX IAG, AGL ENERGY LIMITED – ASX AGL, TRANSURBAN GROUP LIMITED – ASX TCL, RECKON LIMITED – ASX RKN, MIRVAC GROUP – ASX MGR, MITSUBISHI UFJ FINANCIAL GROUP INCORPORATED, JP MORGAN AUSTRALIA LIMITED, ORD MINNETT GROUP LIMITED, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

Data laws a win for bank customers

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Original article by Supratim Adhikari, Joyce Moullakis
The Australian – Page: 20 : 2-Aug-19

Australian Banking Association CEO Anna Bligh says open banking will boost competition and will be good for bank customers. Open banking becomes possible following the passage of the federal government’s Consumer Data Right legislation, which will make it easier for customers to change financial institutions. MoneyPlace CEO Stuart Stoyan says open banking will lead to the elimination of poor products and services, and that the big banks will actually be one of its biggest beneficiaries, despite their misgivings about the open banking reforms.

CORPORATES
AUSTRALIAN BANKING ASSOCIATION, MONEYPLACE PTY LTD

US Fed rate cut gives Reserve Bank cover

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Original article by Vesna Poljak, Luke Housego
The Australian Financial Review – Page: 1 & 31 : 2-Aug-19

Andrew Canobi of Franklin Templeton says the US Federal Reserve is still widely tipped to announce two further interest rate cuts over the next year. However, he says the central bank is likely to pursue less aggressive monetary policy easing than had been recently forecast, after chairman Jerome Powell signalled that the rate cut on 1 August will not be the start of "a long series of rate cuts". The more hawkish tone from the Federal Reserve will be welcomed by the Reserve Bank of Australia, as it should reduce any upward pressure on the Australian dollar.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD, FRANKLIN TEMPLETON ASSET MANAGEMENT LIMITED, RESERVE BANK OF AUSTRALIA

Fed cut lifts pressure on RBA board

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Original article by John Kehoe
The Australian Financial Review – Page: 1 & 4 : 1-Aug-19

Economists suggest that better-than-expected inflation data for the June quarter will prompt the Reserve Bank of Australia to leave official interest rates on hold in August. The consumer price index rose 0.6 per cent during the quarter and 1.6 per cent year-on-year. However, inflation remains well below the RBA’s target range of 2-3 per cent, and further monetary policy easing is possible later in 2019 if the unemployment rate does not fall. The US Federal Reserve’s August interest rate cut may also force the RBA to act before the end of the year.

CORPORATES
RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD

Share surge welcome but devil’s in the detail

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Original article by David Rogers
The Australian – Page: 27 : 1-Aug-19

The Australian sharemarket gained 21 per cent in the first seven months of 2019, its best start to a calendar year since 1991. However, Jason Steed of JP Morgan still expects the benchmark S&P/ASX 200 to be trading at around 6,300 points at the end of 2019. He notes that although forward earning-per-share estimates have been revised upwards, this is primarily due to the mining sector. Meanwhile, Tony Brennan of Citigroup says the prospect of further official interest rate cuts could see the ASX 200 reach his firm’s mid-2020 target of 7,000 points.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, JP MORGAN AUSTRALIA LIMITED, CITIGROUP PTY LTD

ASX hits record high, topping 2007 peak

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Original article by David Rogers
The Australian – Page: 17 & 25 : 31-Jul-19

The S&P/ASX 200 has more than doubled since reaching a low of 3,120.8 points during the global financial crisis. The Australian market’s year-to-date gain of 21 per cent is its strongest since 1991, potentially putting it on track for the best year since 2009. Meanwhile, Shane Oliver of AMP Capital warns that the 2019 rally means there is the risk of a short term correction, and Hasan Tevfik of MST Marquee says the market’s high forward price-to-earnings ratio means investors need to be "quite selective" about the stocks they buy.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, AMP CAPITAL INVESTORS LIMITED, MST MARQUEE, PENGANA CAPITAL GROUP LIMITED – ASX PCG, RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD

RBA could cut cash rate as soon as August

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Original article by William McInnes
The Australian Financial Review – Page: 24 : 30-Jul-19

The futures market has priced in a 20 per cent chance that the Reserve Bank of Australia will reduce the cash rate for a third consecutive month in August. Inflation data to be released on 31 July may influence the timing of any rate cut; market expectations are for a CPI of 1.5 per cent for the June quarter, below the RBA’s forecast of 1.6 per cent. National Australia Bank economist Tapas Strickland says the CPI reading would probably need to be around 1.3 per cent or 1.4 per cent for the central bank to reduce the cash rate in August.

CORPORATES
RESERVE BANK OF AUSTRALIA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, IFM INVESTORS PTY LTD, UNITED STATES. FEDERAL RESERVE BOARD, EUROPEAN CENTRAL BANK

It’s a long way to the top for a market in reach of record high

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Original article by Andrew White, Eli Greenblat
The Australian – Page: 17 & 28 : 30-Jul-19

The S&P/ASX 200 closed less than three points shy of its all-time record on 29 July, but the upcoming corporate earnings season may see the benchmark index reach a new high. The S&P 500 and the FTSE 100 surpassed their 2007 peaks in 2013, while the Nikkei did so in 2015. Alphinity Investment Management’s Bruce Smith has downplayed the significance of the ASX 200’s rise, noting that the S&P ASX All Ordinaries Accumulation Index also rose above its 2007 levels in 2013 and has since consistently reached new highs.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, STANDARD AND POOR’S 500 INDEX, FTSE 100 INDEX, NIKKEI 225 INDEX, STANDARD AND POOR’S ASX ALL ORDINARIES ACCUMULATION INDEX, ALPHINITY INVESTMENT MANAGEMENT PTY LTD, WILSON ASSET MANAGEMENT, OPHIR ASSET MANAGEMENT PTY LTD, RESERVE BANK OF AUSTRALIA