The ASX 200 is up 19 points in mid-morning trade after the Fed-focused-festivities. Gold all sparkly as US$ drops, banks need more capital to get their cultural sh*t in order (again!), and MHJ has been ripping of staff for years. Housing finance today and US CPI tonight.  #ausbiz


  • APRA – Has applied additional capital requirements to the 3 majors (ex-CBA) in response to self-assessments of into governance, culture and accountability. Previously ordered CBA to hold another $1bn in additional capital)
    • ANZ – Needs $500m, or 18bp impact on CET1. Separately (previously announced by APRA) another 15bp of CET1 capital required for revisions to the measurement of counterparty credit risk (SA-CCR) commenced on 1 July 2019.
    • Westpac (WBC) – $500m or 16bp impact (was 10.64% as at 31 Mar)
    • National Australia Bank (NAB) – $500m or 16bp.
  • Michael Hill (MHJ) – Trading update. Against prior year, same store sales were flat at +0.1% and total sales were down by 0.8% for FY19Q4. 4Q performance demonstrates that the contraction in FY19 sales has stabilised. FY gross margin of 61.1% versus 62.8% pcp.e-commerce growing, up 43.6% and now 2.8% of total sales (was 1.9%). 10 new stores were opened and 11 under-performing stores were closed along with 5 Emma & Roe stores during the year. Remediation program to address historic Award compliance issues in Australia. Results in an estimated one-off cost in the range of $10m to $25m.
  • Whitehaven Coal (WHC) Safety performance improved significantly with the TRIFR at 6.16 at the end of June; Strong finish to the year of 7.3Mt ROM coal production, up 25% on the previous corresponding period (pcp); June quarter saleable coal production of 5.2Mt, up 9% on pcp; June quarter coal sales (including purchased coal) of 5.3Mt, up 12% on pcp; ROM coal production of 23.2Mt exceeded full year guidance; Coal sales including purchased coal of 21.6Mt, near the level of the pcp; Record full year ROM coal production from Maules Creek of 11.7Mt, up 7% on pcp; Narrabri performed strongly in the June quarter producing 1.9Mt ROM coal and 6.4MT for the full year, exceeding guidance by a wide margin; Winchester South declared a Coordinated Project by the Queensland Government
  • Pendal Group (PDL) – FUM. Pendal Australia experienced net outflows of -$2.0bn largely as a result of the previously announced Westpac redemption of $1.5bn which comprised $2.1bn redeemed from the legacy book partially offset by $0.6bn coming into the Westpac Other book, all part of the one transaction. $0.2bn was won via the institutional channel which was led by lower margin cash inflows (+$0.3bn). JOHCM saw net outflows of -$0.4bn for the quarter led by net outflows of European OEICs (-$0.5bn) and emerging markets strategies (-$0.4bn) in the institutional channel. Offsetting these outflows were strong inflows into global strategies (+$0.4bn) via the institutional channel and the US pooled funds, and UK equities (+$0.2bn) in the OEICs. The effect of the net flows during the June quarter on Pendal Group revenue is a decrease to annualised fee income of $10.9m.



Overall sentiment fell 4.1% to 96.5 (from 100.47) two 2 year low – Westpac called the report troubling because of what should have been a supportive backdrop. 2 interest rate cuts, tax cuts, stabilisation in the housing market and improvement in trade in the trade dispute.

Regional areas -14%, those with a trade qual -7.6% (residential slowdown). Confidence in the labour market continued to deteriorate sharply in July

Housing-related sentiment continues to show a clearer positive response to lower interest rates with assessments of both ‘time to buy’ and house price expectations recording strong increases in July.

The ‘time to buy a dwelling’ index rose 5.4% 123.2, the first above trend reading in four and a half years. The index is up 19.5% on the same time last year. The biggest turnaround continues to come in Sydney and Melbourne where substantial price corrections have also improved affordability over the last two years.

The Westpac-Melbourne Institute Index of House Price Expectations Index posted another robust 8.9% increase following last month’s spectacular 22.7% gain. At 119.4, the Index is now at its highest level since May last year but still below the long run average read of 125. All states have recorded sharp rises over the last two months and net positive reads comfortably over the 100 mark. Just over 40% of consumers expect prices to be higher in a year’s time – that compares to less than 20% back in March





US EQUITIES – S&P500 +13 (+0.45%), Dow Jones +77 (+0.29%), NASDAQ +61 (+0.75%)

Main themes

  • US Federal Reserve Chairman Jerome Powell raised expectations of an interest rate cut, citing risks to the US economy. Powell said concerns about trade policy and a weak global economy “continue to weigh on the US economic outlook” and the Fed intended to “act as appropriate” to sustain a decade-long expansion.
  • said that baseline expectations for solid economic growth remain in place, but he noted that the composition of growth in Q1 was poor as net exports and inventories drove the overall increase. The Fed chairman also said that growth in consumer spending was weak in Q1 while business investment slowed notably
  • The implied likelihood of a 50-basis point rate cut on July 31 has jumped to 28.7% from 3.3% yesterday. The US Dollar Index is down 0.4% at 97.13
  • FOMC meeting minutes released minutes was muted, considering Chairman Powell provided a more current view during today’s testimony.

EUROPEAN MARKETS – Mostly lower. STOXX600 -0.20%, UK FTSE -0.08%, German DAX -0.51%, French CAC -0.08%,


  • The USD is lower at 97.23.
  • The Aussie dollar is stronger at US69.59

BONDS – 2-yr: -5 bps to 1.85%, 3-yr: -1 bp to 1.83%, 5-yr: -2 bps to 1.85%, 10-yr: +1 bp to 2.06%, 30-yr: +3 bps to 2.56%


  • Oil – WTI futures rose US$2.60 or 4.5% to US$60.43. Crude inventories fell more than expected (9.5mb vs 3.1mb) and an expected storm in the Gulf of Mexico led to oil producers halting production and evacuating rigs.
  • Gold was up 1.1% to $1,415.40 after Powell’s comments and a drop in the US dollar.
  • Iron Ore – Commsec has iron ore down US$1.40 or 1.1% to US$121.20 a tonne,
  • LME metals – Strong increases. Cu +2.47%, Ni +2.12%, Al +1.73%.


  • US economic data – Weekly MBA Mortgage Index -2.4% (prior -0.1%); May Wholesale Inventories 0.4% (consensus 0.4%; prior 0.8%)
  • Bloomberg reported that President Trump asked his recent nominees to the FOMC Board of Governors about ways to weaken the dollar.
  • China’s Foreign Ministry spokesman, Geng Shuang, called on the United States to withdraw the recent sale of $2.2 bln worth of arms to Taiwan.
  • European growth downgrade – The European Commission trimmed its forecast for 2020 GDP growth in the eurozone to 1.4% from 1.5%. The growth forecast for 2019 remains at 1.2%.
  • UK economic data – May Industrial Production +1.4% m/m (expected 1.6%; last -2.9%) to be 0.9%yoy (expected 1.1%; last -1.1%). May Manufacturing Production +1.4% (expected 2.2%; last -4.2%) to be unchanged yoy (expected 1.0%; last -1.0%).
  • European economic data – French Industrial Production 2.1% (expected 0.3%; last 0.5%); Italian Industrial Production grew 0.9% (expected 0.1%; last -0.8%), to be -0.7%yoy (expected -0.4%; last -1.5%)

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