US market closed for Labor Day, Europe a little higher, ASX futures down 3 points

With the US closed last night and a world of economists boring themselves stupid over whether there will be a September US interest rate hike or not next week, there's really not too much to report this morning. ASX futures did almost nothing overnight, the Aussie dollar is marginally off its lows but remains firmly in a down-trend, and buying opportunities are plentiful as the ASX remains depressed and the big four banks' dividend yield rises. In order of historical yield (all fully franked), here are the pre-tax dividend yields: ANZ: 6.78%; NAB: 6.64%; WBC: 6.21%; CBA: 5.8%. Grossed up (just divide the percentage by 0.7 if you are able to take full advantage of franking credits), that's an average of 9.08% if you were to buy the big four in equal amounts. While this is a simplistic view of the top end of the ASX, it's not an unreasonable one - even after the GFC, CBA only cut its 2009 dividend by about 15%. Yes a rate hike in the US could precipitate tighter monetary policy to come in Australia; however, the big four have been dealt a triple-whammy this year (financial system inquiry, Greece, August sell-off) and the probable 'fourth whammy' will likely be some sort of review of mortgage growth as APRA continues to (attempt to) over-regulate lending, as it is continually lent on by the RBA to help slow the pockets of house price excess in capital cities.

The biggest risk to the Australian economy is a sudden rise in inflation and a subsequent need for an aggressive RBA tightening cycle; so, paradoxically, the commodity gloom that we're experiencing is probably the best insurance policy against the Australian economy blowing up from loan defaults, catalysed by higher interest rates. Lower metals and oil prices are keeping a perpetual lid on inflation rates and that is certainly giving me confidence that, while business and consumer sentiment will bounce around with global markets, systemic risks in the Australian financial system are not present.

To today's charts, we have a very quiet night on the ASX 200 futures market, followed by a continuing down-trend in the Aussie dollar, and lastly the fall of the big four banks this year.


Source: Rivkin, Saxo Bank

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This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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