Markets Overview
- ASX SPI 200 futures little changed at 8,006.00
- Dow Average down 0.2% to 40,736.96
- Aussie down 0.1% to 0.6653 per US$
- US 10-year yield fell 6.0bps to 3.6404%
- Australia 3-year bond yield fell 2.8 bps to 3.52%
- Australia 10-year bond yield fell 4.6 bps to 3.91%
- Gold spot up 0.4% to $2,516.41
- Brent futures down 3.0% to $69.71/bbl
Economic Events
- 10:20: (AU) RBA’s Hunter-Speech
- 11:00: (AU) Australia to Sell A$1 Billion 2.75% 2027 Bonds
A rally in the world’s biggest technology companies lifted stocks, countering a slew of cautious comments from American bank executives that sent financial shares tumbling.
Tesla Inc. led gains in megacaps. Oracle Corp. hit an all-time high. JPMorgan Chase & Co. sank more than 5% after tempering its earnings optimism. Bank of America Corp. said investment-banking results will come in lower than some on Wall Street expected. Earlier this week, Goldman Sachs Group Inc. signaled its trading unit is on course to drop 10% from the prior year. Ally Financial Inc. flagged intensifying credit deterioration among its borrowers.
Traders also weighed election risks ahead of the first debate between former President Donald Trump and Vice President Kamala Harris. The match-up promises more clarity for investors who’ve already spent months parsing campaign-trail language around tax proposals, tariff projections, government spending plans and policies on energy, electric vehicles, health care and more.
In the run-up to the consumer price index, a 22V Research survey showed that 56% of respondents believe that core inflation is on a “Fed-friendly glide path”. Meantime, the share of investors expecting a recession has stayed elevated. Roughly 48% of investors surveyed expect the reaction to CPI to be “mixed/negligible,” 32% said “risk-on” and only 20% “risk-off.”
The S&P 500 rose 0.45%. The Nasdaq 100 added 0.9%. The Dow Jones Industrial Average fell 0.2%. A Bloomberg gauge of the “Magnificent Seven” megacaps jumped 1.5%. The Russell 2000 of small firms was little changed. The KBW Bank Index sank 1.8%.
Treasury 10-year yields dropped six basis points to 3.64%. Brent futures slid below $70 as oversupply fears deepened.
US equities are unlikely to slump 20% or more as the risk of a recession remains low against expected interest-rate cuts from the Fed, according to Goldman Sachs Group Inc. strategists.
Other News
ANZ Group Holdings Ltd.’s markets division accounts for a tiny fraction of the Australian bank’s roughly 40,000 employees. But it’s now becoming an outsized source of trouble for the 189-year-old firm and Chief Executive Officer Shayne Elliott.
ANZ is considering a raft of policy changes to help restore the firm’s damaged reputation after three traders departed the bank amid allegations of misconduct in the Sydney dealing room. The country’s securities regulator is also investigating the bank’s role as risk manager in a debt sale last year, and Elliott has apologized for errors in spreadsheets that misrepresented the value of fixed-income trading given to a government agency.
Interviews with more than a dozen current and former ANZ employees paint a picture of a firm that has grappled for years with allegations of poor behavior among traders. In one sign of how the bank has struggled to bring an end to such behavior, people familiar with the matter said ANZ human resources personnel conducted an internal investigation of the Sydney trading operation in 2019 — questioning staffers about drinking and other conduct issues.
“There’s quite a clear, slow drift back to old practices and old cultures in banking and finance,” said Allan Fels, former chair of the country’s competition regulator and professor at the University of Melbourne and Monash University. “There is enough of this occurring to be an ongoing concern. We have not solved the problems of the industry.”
ANZ’s trading operation is now looking like the problem child of the country’s banking sector, and even Elliott’s job and compensation could be on the line.
An ANZ spokesperson said the firm takes “the conduct and behavioral matters identified within our Sydney dealing room seriously,” according to a statement. The company has “been very clear that where we find any evidence of wrongdoing, those involved will be held accountable.”
In February this year, Elliott had reflected on how he thought ANZ had become a much better organization since a Royal Commission inquiry into financial sector misconduct five years ago led Australian banks to overhaul their business practices and internal governance. When it came to culture and purpose, “one of the things I would like ANZ to be known for is doing the right thing” he wrote in a LinkedIn post.
Six months later, he was defending the bank in front of parliamentarians. Elliott pledged that there will be a series of changes to ensure things related to misconduct don’t happen again.
ANZ shares have lagged behind peers over the past year and on Aug. 23, the country’s banking regulator told the firm it needed to hold more capital. The Australian Prudential Regulation Authority said the recent issues in the markets division suggest the bank has yet to “adequately address deficiencies in its controls, risk culture, governance and accountability.” The agency also told ANZ to appoint an independent party to review the root causes of the problems and come up with a plan to fix them.
(Bloomberg)
