While offshore markets this week will be looking at weak oil prices, the US-China trade war (with talk of some sort of deal by the end of the month), the health of US junk bonds, the Thanksgiving retailing assault, followed by Cyber Monday, here in Australia it’s the banks and the Hayne Royal Commission that will dominate the week’s news flow.
The major banks were among the biggest weights on the weak ASX last week. Westpac fell 8.8% (it went ex its 94 cent dividend early in the week) to $25.27, Commonwealth Bank lost 2.9% to $68.90, NAB closed 4.5% lower at $23.77 and ANZ fell 6.5% to close at $25.36.
The losses were particularly acute coming the week before the banks’ CEOs (and including Macquarie Group) and some of their chairs have appointments at the final public sessions of the Hayne Royal Commission starting today.
This week sees Commonwealth chair, Catherine Livingstone and CEO Matt Comyn appearing, followed by Westpac CEO Brain Hartzer and then departing Macquarie CEO, Nicholas Moore. ASIC is also down to appear in the Sydney session this week.
It will be the last chance for the banks to protect their reputations before the commission. All have moved in some way to sell off troubled or now unwanted assets such as insurance, wealth protection, funds management, and advice.
Next week the Commission moves to Melbourne and it will be the CEOs of the NAB and ANZ who feature, plus others. Shares in AMP (another whose CEO will appear in the next fortnight) saw its shares lose more than 35 to end at $2.58.
In Australia, a speech by RBA Governor Phillip Lowe tomorrow will be watched for clues on the outlook for interest rates. It will be the first of two speeches Dr. Lowe make this month. Tuesday’s speech is entitled, Trust and Prosperity which should tie right into the issues uncovered by the Hayne Royal Commission.
The minutes from the RBA’s last board meeting (also out Tuesday) are likely show that it remains relatively upbeat and still sees the next move in rates as most likely to be up but that it remains in no hurry to move at present. Skilled vacancy data will also be released Wednesday.
The local September 30 reporting season wanders on – Australian Agricultural Co should finally report this week, while global testing giant, Brisbane-based ALS is also down to release its interim report tomorrow.
Offshore US trade moves and Brexit developments in the UK and Europe will continue to steal attention this week while Wall Street will shut up shop effectively on Thursday and Friday for the Thanksgiving holiday and Black Friday retailing surge, and then those home alone will join in with Cyber Monday.
The messy Brexit process with Prime Minister Theresa May fighting off leadership challenges, taking her appeal to the British public to support the draft Brexit deal and a continuation of the at times ugly brawling between the leavers and remainders.
Along with the two big shopping seasons, US third quarter retailer results will come from a handful. Best Buy, Kohl’s, TJX Cos, Target, Lowe’s, Gap, L Brands, Ross Stores, and Urban Outfitters are among those reporting results.
The Financial Times said at the weekend “strength in the job market and US economy have bolstered consumer spending and retailers’ fortunes, but concerns are beginning to emerge about a struggle to shift inventory and what that could mean for the companies’ top and bottom lines.”
Elsewhere in the US, the focus will be on business conditions survey results for November to be released Friday which are expected to remain solid. Housing starts for October are out Tuesday, existing home sales on Wednesday, while durable goods orders for last month are also out on Wednesday.
Watch also for the continuing sell-off in US junk bonds and other lesser rated corporate securities. The problems in this sector are starting to worry more and more investors.
Perhaps that is why US Treasury bond yields fell last week with the rate on the key 10-year bond tumbling five points to 3.07%. Six weeks ago it was at a four and a half year high over 3.26%.
Eurozone business conditions for November are also out on Friday and will be watched for signs of improvement or at least stabilisation after weakening last month
Japanese headline inflation for October tomorrow is likely to show a rise thanks to higher oil prices last month, but core inflation is likely to remain low at around 0.4% year on year. The manufacturing conditions PMI for November will be released on Friday as well. Trade data for October will also be released today.
