Australian shares will open lower today, with an eye on a speech later today from Reserve Bank Governor Phil Lowe, as well as the June quarter consumer inflation data on Wednesday.
ASX 200 futures lost 25 points or 0.4% on overnight Friday pointing to a soft start to trade at the open for the ASX
Global markets will be watching the two day meeting of the US Federal Reserve on Tuesday and Wednesday (with the usual statement out early Thursday morning).
A rate increase is not tipped, but analysts do expect the Fed to change the wording of its post meeting statement to indicate greater uncertainty about the health of the US economy and the slide in inflation and wages (which have previously been described as “transitory”by fed chair, Janet Yellen).
The Aussie dollar will start at around 79.16 US cents after falling Friday night in the wake of the demolition of the furphy that interest rates will rise by RBA Deputy Governor, Guy Debelle and that housing will crash by the head of the bank’s Financial system department, Michelle Bullock.
She pointed out that the new higher capital rules from APRA last week will make the banks safer.
Both made speeches on Friday as part of a concerted campaign by the central bank to reset the market’s understanding of current monetary policy thinking and later today Mr Lowe will address the links between the labour market (which is strengthening and wages, which remain weak) and monetary policy.
Overseas a weak finish for European and US markets also helped force investors to move to a hesitant footing, along with another weak performance by oil ahead of an OPEC meeting in Russia later today (see separate story).
Iron ore and gold rose last week, but oil remains the big headache for the markets.
So Eurozone shares fell 1.3% on Friday not helped by a further rise in the Euro, and the US S&P 500 fell less than 0.1%, but the Dow dipped.
Share markets were mixed over the last week with US shares up 0.5% helped by good earnings news and Chinese shares up 0.7%.
But Japanese lost 0.1%, Eurozone shares fell 2% on the back of a rising Euro and Australian shares were down 0.7% on the back of misplaced perceptions that the RBA has become more hawkish.
Australian bank shares rebounded late in the week after APRA set new capital levels for the sector, which have to be in place by 2020.
Bond yields fell, with the Aussie 10 year yield back under 2.70% at 2.69% and US yields dipped to 2.24% and will be shaken by whatever the USFederal reserve reveals after its two day policy meeting midweek.
On Wall Street, the S&P 500 index and the Nasdaq extended gains for a third week, while the broader market eased on Friday.
The Dow fell 31.71 points, or 0.2%, to close at 21,580.07. The S&P 500 index dropped 0.91 of a point (0.04%) to end at 2,472.54 and the Nasdaq Composite dropped 2.25 points to finish at 6,387.75.
For the week, the Dow fell 0.3% but the S&P 500 is up 0.5% and the Nasdaq added 1.2%.
The big negative on Friday came from manufacturing giant, General Electric. Its shares fell nearly 3% after it reported a drop in its second-quarter earnings and revenue and gave a weak outlook for the rest of the year. Friday’s fall took the drop so far this year in GE shares to 18%.
In Australia on Friday, bank stocks lost steam as investors took profits after two days of strong gains in the wake of new capital rules from APRA which were not as onerous as nervy investors and analysts had feared.
The ASX 200 index ended the session down 0.7% at 5722.8, for a weekly loss of 0.7% ANZ was the top performer, jumping 4.3% as investors saw it as the least likely of the big banks to need to raise capital in order to meet the APRA rules.
Westpac added 3.3% for a similar belief, But the NAB and CBA could only manage a 1% gain each and some investors think they could need capital issues to meet the new rules.
BHP shares lost 2.6%, Rio shares fell 3.8% (despite solid June quarter production reports) and South32 shares dropped 1.5% on a mixed output report.
A write down and profit warning by Myer saw the shares slump nearly 11%, and CSR shares dropped 5.5% on Friday to a year low of $3.95. Shares in primary Healthcare rose by 0.8% on Friday despite revealing a write down of $575 million. It reaffirmed its earnings guidance for the year at the end of its forecast at around $92 million.
