Markets Overview

  • ASX SPI 200 futures down 0.2% to 8,031.00
  • Dow Average up 0.6% to 41,563.08
  • Aussie down 0.5% to 0.6766 per US$
  • US 10-year yield rose 4.2bps to 3.9034%
  • Australia 3-year bond yield little changed at 3.55%
  • Australia 10-year bond yield rose 1.3 bps to 3.97%
  • Gold spot down 0.7% to $2,503.39
  • Brent futures down 2.4% to $76.93/bbl

Economic Events

  • 09:00: (AU) Aug. Judo Bank Australia PMI Mfg, prior 48.7
  • 11:00: (AU) Aug. Melbourne Institute Inflation, prior 2.8%
  • 11:00: (AU) Aug. Melbourne Institute Inflation, prior 0.4%
  • 11:30: (AU) 2Q Company Operating Profit QoQ, est. 0%, prior -2.5%
  • 11:30: (AU) July Private Sector Houses MoM, prior -0.5%
  • 11:30: (AU) Aug. ANZ-Indeed Job Advertisements , prior -3.0%
  • 11:30: (AU) July Building Approvals MoM, est. 2.8%, prior -6.5%
  • 11:30: (AU) 2Q Inventories SA QoQ, est. -0.1%, prior 1.3%

Asian stocks are set for a cautious start into a historically volatile month for markets as signs mount that China’s efforts to support its ailing economy are yet to take hold.

Equity futures in Australia and Hong Kong point to early losses on Monday, while those for Japan and China rose. US contracts were slightly down. The S&P 500 closed 1% higher on Friday ahead of an MSCI index rebalancing and as data supported expectations of looming Federal Reserve rate cuts.

The dollar and euro were steady early Monday after populist parties on the extreme right and left looked set to win two regional elections in Germany. In commodity markets, oil fell and gold was little changed.

Traders will be focusing on the Caixin China manufacturing PMI due Monday after the official gauge of factory activity contracted for a fourth straight month in August, the latest sign the country may struggle to meet this year’s economic growth target.

“More fiscal easing is necessary to help secure the ‘around 5%’ full-year growth target,” Goldman Sachs Group Inc. economists led by Lisheng Wang wrote in a note Sunday. “Compared to the first half, we expect domestic macro policy to be more supportive in the second half – especially on the fiscal front – although the magnitude of easing should still be smaller than previous major easing cycles.”

China’s residential slump also deepened last month, while New World Development Co., Hong Kong’s most indebted major property developer, said it expects to post its first annual loss in two decades.

September is historically a volatile month for global markets. It’s been one of the worst months for stocks in the past four years, while the dollar typically outperforms, according to data compiled by Bloomberg. Wall Street’s fear gauge – the Cboe Volatility Index, or VIX – has risen each September the past three years, the data show.

This month may be no different with the crucial US jobs report later this week serving as a guide to how quick, or slow, the Fed will cut rates, and as the US election campaign gets into full swing. An options trader or traders spent upwards of $9 million to protect against a surge in the VIX this month.

US stocks rose Friday as a report showed consumer sentiment improved for the first time in five months as slower inflation and prospects for Fed cuts helped lift expectations about personal finances. The Fed’s preferred measure of underlying US inflation — the core personal consumption expenditures price index — rose at a mild pace.

Treasury 10-year yields climbed four basis points to 3.9% and the dollar rose as the data eroded support for a jumbo interest-rate reduction in September. Traders are pricing the Fed’s easing cycle will begin this month, with a roughly one-in-four chance of a 50 basis point cut, according to data compiled by Bloomberg. Cash Treasuries are closed globally Monday for the US Labor Day holiday. Australian bond yields rose in early trading.

Other News

ANZ Group Holdings Ltd. boss Shayne Elliott said the bank has suffered significant reputational damage and needs to do more to improve risk management in the wake of allegations over poor culture and probes into trading practices.

A number of allegations have been externally examined that relate to conduct, and three people have subsequently left the bank, he said Friday, facing questions from Australian lawmakers in Canberra.

Elliott said there were complaints from staff that a small number of people had behaved badly, citing the use of profanity in the dealing room and employees returning to the trading floor having consumed an unreasonable amount of alcohol.

“You always have to be concerned, these are serious allegations, whether it’s the conduct of individuals or the potential for market manipulation,” Elliott, ANZ’s chief executive officer, said. “Clearly we’ve got work to do.”

CEOs from the nation’s four major banks have testified during a two-day hearing in front of the House of Representatives Economics Committee. It’s part of an annual review into lenders that spans a wide range of topics from digital payments to regional branches and the impact of monetary policy.

The Australian Securities and Investments Commission is running an investigation into ANZ that it expects will continue into 2025 around the firm’s role in a Treasury bond sale last year. The Australian Prudential Regulation Authority last week increased the capital ANZ needs to hold, citing a lack of improvement in risk management and insisted on an independent audit of the allegations.

Elliott said his firm is working with APRA on the scope of an independent culture and control review within its markets business which will report to the board. The board will ensure there are appropriate consequences for proven failures or misconduct, he said.

“As the committee may appreciate, there is a limit to how much I can discuss these matters today,” Elliott said. “However, I do assure the committee that we are taking them very seriously.”

ANZ has admitted that it overstated its bond-trading volumes in reports it submitted to the government. The bank has engaged law firms to probe both matters, and pledged to hold people accountable for any wrongdoing it finds.

ANZ is helping ASIC with its investigation over the April 2023 bond sale and documents shared may have reached the millions at this point, he said. Elliott said that internal inquiries by the bank haven’t shown any evidence of misconduct, market manipulation or otherwise.

“At this point ASIC has not put an allegation to us,” Elliott said. “They are doing an investigation.”

Separately, Commonwealth Bank of Australia CEO Matt Comyn, who was first up on Thursday, said regulators have an “undue level of concern” about the big banks scrapping bonus caps when mortgage brokers never adopted such pay reforms. Later in the day, Westpac Banking Corp.’s Peter King criticized social media tech giants for being “missing in action” in closing the loop on scams.

(Bloomberg)