Markets Overview

  • ASX SPI 200 futures down 0.3% to 7,188.00
  • Dow Average little changed at 34,645.99
  • Aussie little changed at 0.6427 per US$
  • U.S. 10-year yield fell 1.2bps to 4.2762%
  • Australia 3-year bond yield rose 1.2 bps to 3.84%
  • Australia 10-year bond yield rose 0.7 bps to 4.17%
  • Gold spot down 0.5% to $1,913.46
  • Brent futures up 1.5% to $92.00/bbl

Economic Events

  • 14:30: (AU) Aug. CBA Household Spending YoY, prior 1.3%
  • 14:30: (AU) Aug. CBA Household Spending MoM, prior 0%

Asian equities look set for a cautious open Wednesday as global markets gear up for a key inflation report that’s expected to bring insights on the outlook for the Federal Reserve’s benchmark interest rate. Oil rallied on strains in global supplies.

Futures for Japanese and Australian shares pointed to marginal declines while contracts for Hong Kong rose slightly and a gauge of US-listed Chinese companies was little changed.
A rout in technology companies dragged down the US stock market, with the Nasdaq 100 falling 1.1%. Apple Inc., which unveiled the iPhone 15 and other products, dropped almost 2%. The S&P 500 slid 0.6%.

The gains in crude sent energy shares higher and added to concern about inflationary pressures. Oil reached a 10-month high as production cuts by leaders of the OPEC+ contribute to projections for the tightest crude in a decade in the months ahead.

Treasury two-year yields, which are more sensitive to imminent Fed moves, topped 5%. An auction of 10-year US Treasury notes on Tuesday drew the highest yield since 2007 — a day after a sale of three-year notes did the same — as investors demand increased compensation for elevated inflation and growth in the supply of US government debt. The dollar edged higher Tuesday while the yen was little changed.

With the US economy defying pessimism and energy prices rising, Wednesday’s consumer-price index is expected to show a pick-up in inflation pressures. Swap traders are currently betting the Fed will stay on hold at a policy meeting next week, and see roughly a 50% chance that it delivers a hike in November.

Other News

Commonwealth Bank of Australia expects the severe competition for home loans that’s eroding market share for the country’s biggest lender to endure into next year, piling further pressure on its largest business.

The firm’s decline in total housing loans in July likely extended into August after the bank’s decision to tilt toward shareholder returns. That’s according to Michael Baumann, executive general manager for home buying at Commonwealth Bank.

“Competition is so fearsome right now,” Baumann said in an interview in Sydney. “I feel it is at a level that we haven’t seen in the past and that will probably go into next year.”

Chief Executive Officer Matt Comyn is grappling with challenges to profitability amid the rare shrinkage in its mortgage portfolio. Banks are jostling for business amid pressure on margins as property prices rebound in an economy that’s showing signs of resilience.

An ultra-low unemployment rate and large savings buffers built during the pandemic are helping to limit increases in consumer arrears, with the majority of mortgage holders ahead on repayments. Still, low fixed-rate home loans are ending and households are contending with far higher borrowing costs as they negotiate new mortgage contracts.

Commonwealth Bank and National Australia Bank Ltd. rewarded shareholders with buybacks last month as the ramp up in interest rates offset higher funding costs that remain a headwind to margins.

With about 25% of the mortgage market, Commonwealth Bank remains the largest player, followed by Westpac Banking Corp, according to the most recent data from the prudential regulator in July. However, Baumann indicated there is a limit to how much he’s prepared to give away.

“The share loss that we had in July and probably the share loss that we had in August as well, means there’s only so much appetite that I have to lose share in the market,” he said. “But, at the end of the day, we have to do the right thing by our customers and also make sure we’re finding the right balance on our shareholder returns.”