Those housing finance figures are not great news for Australia’s banks, which have built built their huge profitability in recent years on some heroic mortgage lending.
The financial sector of the ASX200 is down 0.77% today in a market off 0.25% overall.
Things go from bad to worse in the Australian housing market. Figures just released by the bureau of statistics show that total dwelling finance dropped by 2.1% in August to just over $30bn – much worse than the -1% expected and a big drop on the 0.4% increase in July.
Another big fall in investor lending. It’s down -1.2%.
On the currency markets, the yen has continued to hold up against the dollar at 112 to the greenback. A stronger yen is usually not so good for the Nikkei, which is a stronghold of Japan’s big exporters.
The Aussie dollar – a key proxy for emrging markets in the Asia Pacific region – has also fought back during the big stock selloff, going from around US70.5 to US71.27 this morning.
The Nikkei has dropped a modest amount this morning. We’re currently off by 0.22%, or 50 points, at 22,541 points. The Kospi in Seoul is up 0.47%. Sydney is now down only 0.15%.
Elliott also admits that ANZ’s profits have been hit by the aftermath of the commission, explaining that the bank’s return on equity has fallen from 17-18% to 11% in the past few years.
“ANZ’s profitability is dramatically lower than it was,” he says.
Labor MP Matt Keogh has scored a direct hit against ANZ boss Shayne Elliott bringing applause from the audience in Canberra, which includes people from the Bank Reform Now group.
It came after the bank boss seemed to suggest that money being paid out as compensation to customers belonged to investors (“it’s their money” he said).
But Keogh said: “It’s not – it should have been in the customer’s pocket the whole time,” to which Elliott puts his hands up: “I accept that I misspoke there, fair point.
The bulk of the money is not refunds actually, the bulk of the money is actually the cost of going back and finding and recalculating the money and doing the data search – that was the piece I was talking about, the cost of remediation, the work, costs significant amounts of money, that is what I was referring to – but you are quite right, the refund money obviously belongs to customers.”
In commodities, gold has benefited from falling stocks as investors seek familiar safe havens for their money.
Business Insider tells us that on Thursday gold had its best day since Brexit.
Talking of Brexit, just a quick diversion here which readers might find depressing or amusing, or perhaps a bit of both.
The UK transport department has announced that part of the M26 motorway in Kent will be closed while work is carried out on figuring out how to turn it into a truck park in the event of Brexit causing huge delays at the Channel ports and tunnel.
You couldn’t make it up, as they say.
Kent motorway to shut as work begins on possible post-Brexit lorry park Read more
More from Amy in Canberra.
Shayne Elliott says he has met some ANZ customers who felt abused by the bank, and was personally answering emails from customers. He also gives his personal email to the committee and asks people to contact him directly with their concerns. It’s Shayne.Elliott@anz.com
The committee members, including Liberal MP Trevor Evans, are giving personal cases to Elliott and asking about those customers who still say they are not receiving responses from the bank.
“Every case is unique and they should expect a response,” Elliott said, who is appearing before the committee for the fourth time. “I give my commitment that I will be personally involved in the response from the bank.”
He says he won’t always be the person who speaks directly with the customer, but he makes the commitment that he “will stay on top” of responding to customer’s concerns. But he also says, in terms of time frames, some of the matters are exceptionally complicated, mentioning one case which goes back to 1992. But he’s meeting with more customers this afternoon – including the case Evans just raised.
ANZ chief Shayne Elliott is getting his grilling from a parliamentary committee.
My colleague in Canberra, Amy Remeikis is watching and says that Elliott has told the committee that renumeration had absolutely been part of the ANZ culture – which follows on from Commissioner Kenneth Hayne’s interim report which found “greed” had led to a lot of the misconduct issues.
Elliott said there had been changes, and he admits, again, that he was wrong to have dismissed the need for a royal commission, “given what has been uncovered so far.”
ANZ has engaged in misconduct and conduct falling below community standards and expectations. It is completely unacceptable that we have caused financial harm and emotional distress to our customers.
He also said there was “no pride” being the subject of regulator Asic’sfocus and that it caused reputational damage and was seen as a “major fail”. He said “fear” was a “strong word” when it came to Asic, but the bank “certainly respects Asic”.
Overall, he wants you to know that the bank has changed.
“The bank needs to be able to generate capital so we can fulfil our social obligations, but we need to get that balance right and we clearly failed at that in the past, and we are moving away from that. As I said, revenue, and the generic terms for ‘sales’ hasn’t been part of the group score card in the last three years, so we don’t have that same middle layer, saying ‘middle management have a sales target, but the juniors don’t. We don’t have that today. But we can certainly improve and I agree that we need to do more work in getting that balance right.
Not a bad start for the ASX after yesterday’s big moves. Losses are easing back already but it’s early days. Volatility could be the name of the game today.
Jonathen Chan, market analyst, CMC Markets, thinks so, and flags today’s data (see below) as key set points:.
Futures markets are pointing to a mixed start for Asia Pacific equities. Regional markets may fluctuate in a similar fashion to the overnight action in the US markets. In particular, the Australia housing finance data due this morning may influence the banking sectors, as well the appearance of senior executives at the royal commission inquiry. The Shanghai stock markets may have a chance to rebound if the trade balance data due this afternoon illustrates growth, or potentially lesser impact from the trade war.
We’re off. The ASX200 has slipped 47 points or 0.8% at the open.
I should say that the Australian stock market opens in Sydney at 10am local time (00.00BST) followed by Tokyo and Seoul an hour later. Then at 02.30GMT trading starts in Hong Kong and Shanghai.
And in Australia this morning it is the turn of ANZ bank boss Shayne Elliott to face questioning by MPs in the wake of the damaging revelations of the banking royal commission. The inquiry has exposed a widespread culture of greed in an industry once revered for having avoided the worst ravages of the global financial crisis. Matt Comyn, the boss of the country’s biggest bank Commonwealth, was jeered from the public gallery during his apperance yesterday.
If you’re reading outside Australia and you haven’t followed the course of the commission, here is an excellent wrap of the preliminary findings.
Banking royal commission condemns greed of financial sector in first report Read more
Aside from what happens on the markets, there is a lot of data being released today which will keep us busy.
- At 11.30 Sydney time (01.30BST) we have Australian mortgage lending figures for August which will speak to the state of the housing market. In July they were up 0.4% but the market forecast is -1%.
- The Reserve Bank of Australia’s financial stability review comes at the same time which could contain commentary on the markets.
- We’re also expecting China trade data later which could shed some light on the state of the Chinese economy.
- When Europe awakes, we will get industrial production figures for the eurozone.
One of the biggest talking points of the past 24 hours has been Donald Trump’s comments about the Federal Reserve and interest rate hikes. The president has described the Fed as “out of control” because he thinks it is increasing borrowing costs too quickly and putting pressure on the economy.
Greg McKenna, the independent Australian market strategist, has this salient point:
President Trump has captured the narrative by blaming the Fed for all these market ructions. But the reality is the economy his policies have overheated does need more rate hikes. Markets know that he knows that, but the Fed is the perfect foil in the run-up to the mid-terms.
The New Zealand stock market is up and running. A bit like how they are among the very the first to celebrate New Year, the Kiwis are first out of the blocks for finance. The benchmark NZX-50 index is currently down about 1% after dropping 3.64% yesterday.
Remarkably, it’s still positive for the year, unlike most others.