CBA Drags ASX Down

It is probably fair to say the ASX 200 would have rallied on Friday if it weren’t for the Commonwealth Bank of Australia (CBA). CBA shares were down 3.87% following the announcement of court action being brought by AUSTRAC, the agency responsible for fighting money laundering. CBA has released a statement saying that it will fight the charges and that media speculation regarding possible penalties should be considered as purely speculative. As the largest component of the index, the CBA stock price has an outsized influence on the index. Despite the CBA result the ASX 200 closed down just 0.25%.

For the fifth time in five days the Dow Jones closed at a record high level, up 0.3%, firmly pushing past the 22,000 level although Germany’s DAX index was a standout performer climbing 1.2% for the day. The US saw the release of the jobs report which was positive on all fronts. The employment change of 209,000 was higher than consensus estimates, the unemployment rate ticked down 0.1% to 4.3% and average hourly earnings grew by 0.3%, in line with expectations. Gold dropped by around US$10 on the news as the data is supportive of further rate hikes. Despite this, the market is still pricing only a very small probability of a rate hike at the next meeting in September while a December hike is considered to be about a 50:50 chance according to the CME group FedWatch tool. In any case, the stock market seems completely indifferent about the possibility for further rate hikes as the major US indices continue to make new record highs.

Australia’s retail sales data came out on Friday and was up 0.3% for the month of June. This marks the third straight month of increases indicating that the retail sector may be starting to recover from a weak start to the year. With earnings season upon us it will be interesting to see if the improvement in national retail sales reflects in individual company results. Later this week the Reserve Bank of NZ will make its rate decision and on Friday night the US will release CPI data. Aside from this there are relatively few market significant data releases this week.  

       

Data Releases:

–    No significant data

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This article was written by William O’Loughlin – Local Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.