*Few changes in FOMC statement:
As expected, there were changes in the July FOMC statement compared to June. No surprise as the Fed upgrade its current assessment, highlighting the strengthening in the labor market and moderate economic expansion. In addition, it pointed out that payrolls and other labor market indicators point to some increase in utilization in recent months. There was also a slight upgrade to household spending and a minor tweak in the language on inflation. The big change came in the second paragraph as the Fed inserted the line that “near-term risks to the economic outlook have diminished”. However, it reiterated it continues to closely monitor inflation indicators and global and financial developments. As expected, guidance language unchanged to highlight data dependency and continued expectations for a slow policy normalization process.
*Over 40% of the S&P 500 has now reported for Q2:
Following another busy morning of earnings, over 40% of the S&P 500 has now reported. According to FactSet, the blended earnings decline currently stands at (4.0%), better than the (5.5%) at the end of the quarter. In addition, 71% have beat consensus EPS expectations, just ahead of the one-year average. This is also up from 68% last week and 66% in the first week of earnings season. In the aggregate, companies are reporting earnings that are 5.4% above expectations, down from the 6.7% positive surprise rate at the end of last week, but still nicely above the one- and fiveyear average of 4.2%. The blended revenue decline is now just (0.05%), better than the (0.8%) at the end of the quarter. In addition, 55% have beat consensus revenue expectations, well ahead of the 49% one-year average. In the aggregate, companies are reporting revenues that are 1.4% above expectations, much better than the 0.0% one-year average.
*Oil down over 2% on bearish inventory data:
Oil down for a fifth consecutive day on inventory concerns. Oil somewhat weaker premarket following Tuesday afternoon API report showing smaller-than-expected crude draw and a 1.4M barrel Cushing build. However crude sharply negative following this morning’s DOE data showing 1.7M barrel build vs expectations for a 2M+ draw. Gasoline remains in focus with the fuel posting an overall 450K rise. East coast gasoline glut continues with 500K build despite declining refinery utilization with summer driving season on the wane. Overall oil weakness getting increasing attention with crude now ~16% below $50+/barrel levels it hit in June. Morgan Stanley note recently noted risks remain skewed to the downside for the second half, with some recent supply disruptions (Canada, Nigeria, Libya) resolving and key product demand decelerating.
*Tech the best performer:
Difficult to fit a narrative to sectors with both micro and macro influences. Tech best performer on better-than-feared results/guidance from. AAPL-US. However, TWTR-US sold of on weak guidance. Telecom bounced, though other defensives like utilities and consumer staplesunder further pressure. Earnings still a drag on the latter (KO-US, MOUS, DPS-US). Healthcare a standout with rally in biotech and specialty pharma. AGN-US boosted by near-term closing of generics sale to TEVA-US. Rally inprecious metals boosted materials. Financials little changed, though bank group outperformed despite rates. Consumer discretionary lagged as retail gave back some recent strength. Restaurants mixed after yesterday's selloff (BWLD-US and PNRA-US higher on earnings). Energy underperformed (broad-based selloff) on continued oil weakness.
*Headline durable goods orders miss; core orders a bit better:
Headline durable goods orders down 4.0% in June, worse than consensus for a 1.4% and biggest contraction in two years. Followed downwardly revised 2.8% decline in May (was -2.3%) However, big drag came from volatile transportation sector, with civilian aircraft down close to 60% and defense capital goods orders off more than 20%. Core capital goods orders increased 0.2% after falling a downwardly revised 0.5% in May, marking first increase in three months. However, core shipments fell 0.4% after a 0.5% contraction in prior month. Inventory declined 0.2% (and down at a 3.5% annualized rate for Q2), providing another drag on Q2 tracking estimates. No change in sentiment surrounding sluggish backdrop (O&G headwinds, preference for labor investments), global growth uncertainty, capital return focus).
*Curve at flattest level in nine years (but slowdown worries overdone):
Despite firmer batch of US economic data over last few weeks, still some concerns about the potential signals from the yields (particularly with all the focus on the secular stagnation theme). WSJ pointed out that the 2/10 spread fell to 80 bp on Tuesday, the narrowest in nine years. However, article also reiterated thoughts bond market signals have been distorted by external dynamics, particularly in terms of the growing pool of negative-yielding paper. In addition Bespoke Investment Group pointed out that the 2/10 spread is at the 44 th percentile of its range since 1976, and meaningfully steeper than pre-recession conditions in the 1970s, 1980s,1990s and 200s. Added when spread moves below 85 bp while trending lower, historical data show there are at least two years to go before economy enters into recession.
*Hedge funds see nearly $21B in outflows in June:
Hedge fund space under continued scrutiny. FT cited data from eVestment that showed that despite improved performance from most managers, global hedge funds saw net outflows of $20.7B in June. Followed inflows in April and May. Net redemptions for Q2 totaled $10.7B, marking third straight quarter of outflows, longest losing streak since Q2 2009. Article discussed the usual headwinds in terms of lackluster performance and aggressive fee structures. Worries about overcrowding have been another big issue plaguing perception of industry. Separately, BofA Merrill Lynch said yesterday in its latest Equity Client Flow Trends report that hedge funds were net buyers of stocks for a seventh straight week. In its recent Flows and Liquidity report, JPMorgan said that despite S&P 500 breaking out to new highs, overall equity exposure of hedge funds does not appear to be very high.
*Deutsche still struggling to turn around ship:
Deutsche Bank (DBK-DE) Q2 net income of €20M, down from €818M in the same period last year, but better than consensus call for loss of €22M. Weakness driven by unexpected impairments on intangibles of €285M, restructuring and severance charges of €207M, and litigation charges of €120M. Pre-tax profits across all operating segments below estimates except Postbank as it benefitted from a one-off book gain of €104M related to the Visa stake sale. Warned that restructuring costs are likely to peak this year. Added weakness in numbers reflects a challenging market environment, macro uncertainties including the Brexit vote, lower for longer ECB rates and the implementation of strategic decisions to reshape its business. As of end Q2’16, CET1 ratio of 10.8%, improving slightly from 10.7% end-March but below consensus estimate of 11.3%.
*Support growing within BoJ for more easing:
Recent discussions have hinted at disquiet among BoJ officials in expanding easing this week. Dynamic partially blamed for recent unwind in yen shorts. Without citing sources, Nikkei reported growing support within BoJ for further easing. Said officials looking at multiple proposals, including pushing rates further into negative territory, buying more JGBs, or expanding ETF purchases. Piece discussed widespread backlash surrounding BoJ's NIRP, while also noting concerns that a ramp in ETF purchases may be seen as insufficient. Recall Nikkei Quick survey published Monday showed 22 of 28 analysts expect a move this week. However potential for disappointment remains even if officials act. UBS noted markets pricing in ~60% probability of ¥10T QQE expansion. Moreover timing of any rate cut was seen as problematic, particularly if yield curve flattened and led to yen rally.
*Dollar positioning suggests Fed doubts:
Dollar index hit its best level in over four months, rising for a fifth straight week last week in its longest winning streak since early 2015. Move driven by combination of better US economic data, dampened Brexit contagion fears and pickup in expectations for Fed tightening this year. Also mentioned as a potential stumbling block for stocks given extent of its role in the negative feedback loops (yuan devaluation fears, commodity/EM weakness, earnings headwind) that weighed heavily on global risk sentiment earlier this year. However, WSJ noted that current positioning seems to highlight some doubts as to whether Fed will be able to get any near-term traction on policy normalization. Pointed out that CFTC data revealed only $11.3B in bullish dollar positions last week, meaningfully below the $30B seen a year ago when Fed officials were suggesting a rate increase by December.
*UK economy accelerated prior to EU referendum:
The preliminary reading of UK Q2 GDP was revised up to 0.6% vs prior 0.4% and consensus 0.4%, leaving y/y growth at 2.2% vs prior 2.0% and compared with forecasts for 2.0%. May index of services fell 0.1% vs prior increase of 0.6% and weaker than 0.1% consensus, leaving y/y growth at 0.3% vs prior 0.5%. Upward revision was driven by strongest industrial production since 1999, which increased 2.1% in Q2, and mainly driven by automotive industry and phama. UK Chancellor Hammond said numbers show fundamentals of British economy strong and Britain enters negotiations with the EU from a position of strength. Added he is confident that it has the tools to manage the challenges, and along with the BoE, the government will take whatever action is necessary to support economy.
*EU getting ready for Monte Paschi stress test weakness:
Ahead of 29-Jul EBA bank stress test results, both Rome and Brussels reportedly in a rush to wrap up solution for Monte Paschi (BMPS-IT), in the likely event the lender’s reading will underwhelm markets. Reuters cited an EU official, who said authorities are drawing up contingency plans for the possible winding down of BMPS.IM if it has a poor stress test and no private or public support is available. Italian official dismissed this to Reuters, while other sources pointed to BMPS.IM working on a €5B capital increase as part of plans to fix its balance sheet (reported yesterday by FT) and seeking to pull together a banking consortium to guarantee the cash call by Friday, before stress tests results. Elsewhere, UniCredit (UCG-IT) reportedly considering a stock sale worth $5.5B and selling its entire stake in Polish bank Bank Pekao. Move part of wider strategy to streamline operations.
*German consumer confidence hampered by Brexit vote:
German GfK consumer confidence came in at 10.0 for August vs 10.1 in July, but above the market consensus of 9.9. Gfk said the consumer climate weakened slightly after the UK voted to leave the EU. Pointed out that this is signaled by the decline in both economic and income expectations. The economic expectations index lost 8.6 points in July to 9.4 after three successive increases. July Income expectations fell by 9.9 vs June's increase of 7.8, leaving the indicator at 49.7. GfK said German consumers do not seem to believe the economy can continue to grow at the same pace in the coming months. Pointed to an additional survey carried out this month after the Brexit vote, which asked how it would affect the economy. 51% it would have negative effect on Germany vs 40% that dismissed concerns.
*Japan's Abe proposes more than ¥28T stimulus package:
Japanese markets volatile Wednesday following latest fiscal stimulus developments. Nikkei rallying and yen under pressure after Nikkei reported Japan PM Abe wants to propose stimulus worth more than ¥28T. Plan includes total fiscal outlays of ¥13T, with ¥6T from low-rate FILP. Mag-lev project to be brought forward by as much as eight years. Headline figure fits with previous reports indicating package would be worth ¥20-30T. Boosting take home pay shaping as key part of the package. Reuters cited Chief CabSec Suga, who noted importance of stimulating spending by increasing minimum wage. Earlier Nikkeipiece said proposals to include distribution of ¥10,000 ($95) or more to low-income individuals as well as hiking minimum hourly wage by record ¥24 to ¥822. Proposals also call for cutting premiums paid by workers to unemployment insurance scheme.
*Japan considering 50-year bonds?:
Japan continues to dominate headlines from a policy support perspective. Along with Abe’s promise of a bigger stimulus package, other big headline today revolved around WSJ reported Japan considering 50-year bonds for the first time. Paper said move could bolster thoughts that government’s efforts to revive growth starting to blur the lines with “helicopter money”, particularly if BoJ subsequently purchases the debt through its QQE program. Added that if government does decide to proceed with the 50-year bond option, it could be announced as part of next week’s stimulus package, with bonds issued as soon as current fiscal year, which ends in March. However, Takahiro Tsuji, director of the Finance Ministry’s market finance division, responded to report by saying subject is not currently being studied.
*Doubts still over RBA cut despite subdued inflation:
Mixed reaction to another mostly subdued Aussie inflation print, which has left open question of whether RBA will ease next month. Headline Q2 inflation fell to record low 1.0% y/y from 1.3% in Q1. RBA’s preferred trimmed mean inflation gauge came in at 1.7% y/y, higher than 1.4% expected and in-line with Q1. While the figure remained well below RBA’s 2-3% target it was above the 1.5% projected in May’s statement on monetary policy. Aussie turning lower after initial spike higher. ASX recovering from brief drop. Market-implied odds of 25 bp rate cut haven fallen to ~50% from -US~60% just before the data. Sell-side mixed over potential for RBA cut. Some say number is low enough to justify a move next week. Others say data still affords the RBA some time before it needs to act, but decision is likely to be a very close call.
*Australia and New Zealand Banking Group (ANZ):
ANZ Banking Group is being accused of selling life insurance to a New Zealand couple in Australia who were not eligible for coverage because they are not Australian permanent residents. A Kiwi couple, Charles and Judith Cairns, will be fighting for New Zealand citizens’ rights after being given a green light to sue ANZ and its life insurance arm OnePath for racial discrimination. The couple alleges the bank denied them life insurance coverage because of their nationality, even though they have lived in Australia since 2004 and paid premiums for the past 10 years.
; Victory in the High Court for ANZ Banking Group in the six-yearold bank fees class action is just what the doctor ordered for chief executive Shayne Elliott. This year had been shaping up as an annus horribilis for Elliott until Wednesday’s ruling that the bank was entitled to charge its customers $35 for late payment of credit card debt. Elliott’s tough times began in January with the allegations by former employees that a culture of sex, drugs and alcohol were condoned among senior staff on the bank’s dealing room floor.In March, the Australian Securities and Investments Commission hit the bank with a civil action for alleged rigging of the benchmark interest rate called the bank bill swap rate.
*Bendigo and Adelaide Bank Ltd (BEN); Commonwealth Bank of Australia (CBA); National Australia Bank Ltd (NAB); Westpac Banking Corp Fully Paid Ord. Shrs (WBC):
Four of Australia’s largest banks have asked the competition regulator for permission to join forces and collectively negotiate with Apple to get their own digital wallets onto iPhones. Commonwealth Bank of Australia, NAB, Westpac, and Bendigo and Adelaide Bank have become frustrated by the world’s biggest company’s strategy of locking third-party providers of digital wallets off the iPhone platform in favour of its own Apple Pay system, which is attacking millions of dollars the big banks earn in transaction interchange fees. Four of Australia’s largest banks have asked the competition regulator for permission to join forces and collectively negotiate with Apple to get their own digital wallets onto iPhones. The banks have become frustrated by the world’s biggest company’s strategy of locking third-party providers of digital wallets off the iPhone platform in favour of its own Apple Pay, which is attacking millions of dollars the big banks earn in interchange fees.
As expected, there were changes in the July FOMC statement compared to June. No surprise as the Fed upgrade its current assessment, highlighting the strengthening in the labor market and moderate economic expansion. In addition, it pointed out that payrolls and other labor market indicators point to some increase in utilization in recent months. There was also a slight upgrade to household spending and a minor tweak in the language on inflation. The big change came in the second paragraph as the Fed inserted the line that “near-term risks to the economic outlook have diminished”. However, it reiterated it continues to closely monitor inflation indicators and global and financial developments. As expected, guidance language unchanged to highlight data dependency and continued expectations for a slow policy normalization process.
*Over 40% of the S&P 500 has now reported for Q2:
Following another busy morning of earnings, over 40% of the S&P 500 has now reported. According to FactSet, the blended earnings decline currently stands at (4.0%), better than the (5.5%) at the end of the quarter. In addition, 71% have beat consensus EPS expectations, just ahead of the one-year average. This is also up from 68% last week and 66% in the first week of earnings season. In the aggregate, companies are reporting earnings that are 5.4% above expectations, down from the 6.7% positive surprise rate at the end of last week, but still nicely above the one- and fiveyear average of 4.2%. The blended revenue decline is now just (0.05%), better than the (0.8%) at the end of the quarter. In addition, 55% have beat consensus revenue expectations, well ahead of the 49% one-year average. In the aggregate, companies are reporting revenues that are 1.4% above expectations, much better than the 0.0% one-year average.
*Oil down over 2% on bearish inventory data:
Oil down for a fifth consecutive day on inventory concerns. Oil somewhat weaker premarket following Tuesday afternoon API report showing smaller-than-expected crude draw and a 1.4M barrel Cushing build. However crude sharply negative following this morning’s DOE data showing 1.7M barrel build vs expectations for a 2M+ draw. Gasoline remains in focus with the fuel posting an overall 450K rise. East coast gasoline glut continues with 500K build despite declining refinery utilization with summer driving season on the wane. Overall oil weakness getting increasing attention with crude now ~16% below $50+/barrel levels it hit in June. Morgan Stanley note recently noted risks remain skewed to the downside for the second half, with some recent supply disruptions (Canada, Nigeria, Libya) resolving and key product demand decelerating.
*Tech the best performer:
Difficult to fit a narrative to sectors with both micro and macro influences. Tech best performer on better-than-feared results/guidance from. AAPL-US. However, TWTR-US sold of on weak guidance. Telecom bounced, though other defensives like utilities and consumer staplesunder further pressure. Earnings still a drag on the latter (KO-US, MOUS, DPS-US). Healthcare a standout with rally in biotech and specialty pharma. AGN-US boosted by near-term closing of generics sale to TEVA-US. Rally inprecious metals boosted materials. Financials little changed, though bank group outperformed despite rates. Consumer discretionary lagged as retail gave back some recent strength. Restaurants mixed after yesterday's selloff (BWLD-US and PNRA-US higher on earnings). Energy underperformed (broad-based selloff) on continued oil weakness.
*Headline durable goods orders miss; core orders a bit better:
Headline durable goods orders down 4.0% in June, worse than consensus for a 1.4% and biggest contraction in two years. Followed downwardly revised 2.8% decline in May (was -2.3%) However, big drag came from volatile transportation sector, with civilian aircraft down close to 60% and defense capital goods orders off more than 20%. Core capital goods orders increased 0.2% after falling a downwardly revised 0.5% in May, marking first increase in three months. However, core shipments fell 0.4% after a 0.5% contraction in prior month. Inventory declined 0.2% (and down at a 3.5% annualized rate for Q2), providing another drag on Q2 tracking estimates. No change in sentiment surrounding sluggish backdrop (O&G headwinds, preference for labor investments), global growth uncertainty, capital return focus).
*Curve at flattest level in nine years (but slowdown worries overdone):
Despite firmer batch of US economic data over last few weeks, still some concerns about the potential signals from the yields (particularly with all the focus on the secular stagnation theme). WSJ pointed out that the 2/10 spread fell to 80 bp on Tuesday, the narrowest in nine years. However, article also reiterated thoughts bond market signals have been distorted by external dynamics, particularly in terms of the growing pool of negative-yielding paper. In addition Bespoke Investment Group pointed out that the 2/10 spread is at the 44 th percentile of its range since 1976, and meaningfully steeper than pre-recession conditions in the 1970s, 1980s,1990s and 200s. Added when spread moves below 85 bp while trending lower, historical data show there are at least two years to go before economy enters into recession.
*Hedge funds see nearly $21B in outflows in June:
Hedge fund space under continued scrutiny. FT cited data from eVestment that showed that despite improved performance from most managers, global hedge funds saw net outflows of $20.7B in June. Followed inflows in April and May. Net redemptions for Q2 totaled $10.7B, marking third straight quarter of outflows, longest losing streak since Q2 2009. Article discussed the usual headwinds in terms of lackluster performance and aggressive fee structures. Worries about overcrowding have been another big issue plaguing perception of industry. Separately, BofA Merrill Lynch said yesterday in its latest Equity Client Flow Trends report that hedge funds were net buyers of stocks for a seventh straight week. In its recent Flows and Liquidity report, JPMorgan said that despite S&P 500 breaking out to new highs, overall equity exposure of hedge funds does not appear to be very high.
*Deutsche still struggling to turn around ship:
Deutsche Bank (DBK-DE) Q2 net income of €20M, down from €818M in the same period last year, but better than consensus call for loss of €22M. Weakness driven by unexpected impairments on intangibles of €285M, restructuring and severance charges of €207M, and litigation charges of €120M. Pre-tax profits across all operating segments below estimates except Postbank as it benefitted from a one-off book gain of €104M related to the Visa stake sale. Warned that restructuring costs are likely to peak this year. Added weakness in numbers reflects a challenging market environment, macro uncertainties including the Brexit vote, lower for longer ECB rates and the implementation of strategic decisions to reshape its business. As of end Q2’16, CET1 ratio of 10.8%, improving slightly from 10.7% end-March but below consensus estimate of 11.3%.
*Support growing within BoJ for more easing:
Recent discussions have hinted at disquiet among BoJ officials in expanding easing this week. Dynamic partially blamed for recent unwind in yen shorts. Without citing sources, Nikkei reported growing support within BoJ for further easing. Said officials looking at multiple proposals, including pushing rates further into negative territory, buying more JGBs, or expanding ETF purchases. Piece discussed widespread backlash surrounding BoJ's NIRP, while also noting concerns that a ramp in ETF purchases may be seen as insufficient. Recall Nikkei Quick survey published Monday showed 22 of 28 analysts expect a move this week. However potential for disappointment remains even if officials act. UBS noted markets pricing in ~60% probability of ¥10T QQE expansion. Moreover timing of any rate cut was seen as problematic, particularly if yield curve flattened and led to yen rally.
*Dollar positioning suggests Fed doubts:
Dollar index hit its best level in over four months, rising for a fifth straight week last week in its longest winning streak since early 2015. Move driven by combination of better US economic data, dampened Brexit contagion fears and pickup in expectations for Fed tightening this year. Also mentioned as a potential stumbling block for stocks given extent of its role in the negative feedback loops (yuan devaluation fears, commodity/EM weakness, earnings headwind) that weighed heavily on global risk sentiment earlier this year. However, WSJ noted that current positioning seems to highlight some doubts as to whether Fed will be able to get any near-term traction on policy normalization. Pointed out that CFTC data revealed only $11.3B in bullish dollar positions last week, meaningfully below the $30B seen a year ago when Fed officials were suggesting a rate increase by December.
*UK economy accelerated prior to EU referendum:
The preliminary reading of UK Q2 GDP was revised up to 0.6% vs prior 0.4% and consensus 0.4%, leaving y/y growth at 2.2% vs prior 2.0% and compared with forecasts for 2.0%. May index of services fell 0.1% vs prior increase of 0.6% and weaker than 0.1% consensus, leaving y/y growth at 0.3% vs prior 0.5%. Upward revision was driven by strongest industrial production since 1999, which increased 2.1% in Q2, and mainly driven by automotive industry and phama. UK Chancellor Hammond said numbers show fundamentals of British economy strong and Britain enters negotiations with the EU from a position of strength. Added he is confident that it has the tools to manage the challenges, and along with the BoE, the government will take whatever action is necessary to support economy.
*EU getting ready for Monte Paschi stress test weakness:
Ahead of 29-Jul EBA bank stress test results, both Rome and Brussels reportedly in a rush to wrap up solution for Monte Paschi (BMPS-IT), in the likely event the lender’s reading will underwhelm markets. Reuters cited an EU official, who said authorities are drawing up contingency plans for the possible winding down of BMPS.IM if it has a poor stress test and no private or public support is available. Italian official dismissed this to Reuters, while other sources pointed to BMPS.IM working on a €5B capital increase as part of plans to fix its balance sheet (reported yesterday by FT) and seeking to pull together a banking consortium to guarantee the cash call by Friday, before stress tests results. Elsewhere, UniCredit (UCG-IT) reportedly considering a stock sale worth $5.5B and selling its entire stake in Polish bank Bank Pekao. Move part of wider strategy to streamline operations.
*German consumer confidence hampered by Brexit vote:
German GfK consumer confidence came in at 10.0 for August vs 10.1 in July, but above the market consensus of 9.9. Gfk said the consumer climate weakened slightly after the UK voted to leave the EU. Pointed out that this is signaled by the decline in both economic and income expectations. The economic expectations index lost 8.6 points in July to 9.4 after three successive increases. July Income expectations fell by 9.9 vs June's increase of 7.8, leaving the indicator at 49.7. GfK said German consumers do not seem to believe the economy can continue to grow at the same pace in the coming months. Pointed to an additional survey carried out this month after the Brexit vote, which asked how it would affect the economy. 51% it would have negative effect on Germany vs 40% that dismissed concerns.
*Japan's Abe proposes more than ¥28T stimulus package:
Japanese markets volatile Wednesday following latest fiscal stimulus developments. Nikkei rallying and yen under pressure after Nikkei reported Japan PM Abe wants to propose stimulus worth more than ¥28T. Plan includes total fiscal outlays of ¥13T, with ¥6T from low-rate FILP. Mag-lev project to be brought forward by as much as eight years. Headline figure fits with previous reports indicating package would be worth ¥20-30T. Boosting take home pay shaping as key part of the package. Reuters cited Chief CabSec Suga, who noted importance of stimulating spending by increasing minimum wage. Earlier Nikkeipiece said proposals to include distribution of ¥10,000 ($95) or more to low-income individuals as well as hiking minimum hourly wage by record ¥24 to ¥822. Proposals also call for cutting premiums paid by workers to unemployment insurance scheme.
*Japan considering 50-year bonds?:
Japan continues to dominate headlines from a policy support perspective. Along with Abe’s promise of a bigger stimulus package, other big headline today revolved around WSJ reported Japan considering 50-year bonds for the first time. Paper said move could bolster thoughts that government’s efforts to revive growth starting to blur the lines with “helicopter money”, particularly if BoJ subsequently purchases the debt through its QQE program. Added that if government does decide to proceed with the 50-year bond option, it could be announced as part of next week’s stimulus package, with bonds issued as soon as current fiscal year, which ends in March. However, Takahiro Tsuji, director of the Finance Ministry’s market finance division, responded to report by saying subject is not currently being studied.
*Doubts still over RBA cut despite subdued inflation:
Mixed reaction to another mostly subdued Aussie inflation print, which has left open question of whether RBA will ease next month. Headline Q2 inflation fell to record low 1.0% y/y from 1.3% in Q1. RBA’s preferred trimmed mean inflation gauge came in at 1.7% y/y, higher than 1.4% expected and in-line with Q1. While the figure remained well below RBA’s 2-3% target it was above the 1.5% projected in May’s statement on monetary policy. Aussie turning lower after initial spike higher. ASX recovering from brief drop. Market-implied odds of 25 bp rate cut haven fallen to ~50% from -US~60% just before the data. Sell-side mixed over potential for RBA cut. Some say number is low enough to justify a move next week. Others say data still affords the RBA some time before it needs to act, but decision is likely to be a very close call.
*Australia and New Zealand Banking Group (ANZ):
ANZ Banking Group is being accused of selling life insurance to a New Zealand couple in Australia who were not eligible for coverage because they are not Australian permanent residents. A Kiwi couple, Charles and Judith Cairns, will be fighting for New Zealand citizens’ rights after being given a green light to sue ANZ and its life insurance arm OnePath for racial discrimination. The couple alleges the bank denied them life insurance coverage because of their nationality, even though they have lived in Australia since 2004 and paid premiums for the past 10 years.
; Victory in the High Court for ANZ Banking Group in the six-yearold bank fees class action is just what the doctor ordered for chief executive Shayne Elliott. This year had been shaping up as an annus horribilis for Elliott until Wednesday’s ruling that the bank was entitled to charge its customers $35 for late payment of credit card debt. Elliott’s tough times began in January with the allegations by former employees that a culture of sex, drugs and alcohol were condoned among senior staff on the bank’s dealing room floor.In March, the Australian Securities and Investments Commission hit the bank with a civil action for alleged rigging of the benchmark interest rate called the bank bill swap rate.
*Bendigo and Adelaide Bank Ltd (BEN); Commonwealth Bank of Australia (CBA); National Australia Bank Ltd (NAB); Westpac Banking Corp Fully Paid Ord. Shrs (WBC):
Four of Australia’s largest banks have asked the competition regulator for permission to join forces and collectively negotiate with Apple to get their own digital wallets onto iPhones. Commonwealth Bank of Australia, NAB, Westpac, and Bendigo and Adelaide Bank have become frustrated by the world’s biggest company’s strategy of locking third-party providers of digital wallets off the iPhone platform in favour of its own Apple Pay system, which is attacking millions of dollars the big banks earn in transaction interchange fees. Four of Australia’s largest banks have asked the competition regulator for permission to join forces and collectively negotiate with Apple to get their own digital wallets onto iPhones. The banks have become frustrated by the world’s biggest company’s strategy of locking third-party providers of digital wallets off the iPhone platform in favour of its own Apple Pay, which is attacking millions of dollars the big banks earn in interchange fees.
Latest comments