Market Recap: 2nd November

It was a tough week for the banks with announcements from ANZ, NAB and Westpac of severe losses to cash profits, increased remediation bills and a surge of write-downs. ANZ announced that cash profits had been slashed by $528 million, calculating accounting and restricting charges to amount to $202 million, while remediation charges addressing misconduct have totalled to $188 million. A similar announcement was made by NAB who pledged an additional $128 million to remunerate unpaid staff, on top of the existing $508 million remediation bill. Following the findings of the Federal Court last week, Westpac placed aside $400 million in penalties to address its $1.3 billion fine. Along with this, it flagged $1.2 billion in write-downs over its insurance businesses, with shareholders predicting a smaller second half dividend.

Turning to the markets, the ASX experienced heavy falls this week with a 0.5 per cent loss to finish at 5927.6 on Friday. This heavy loss stands distinctly apart from the steady gains in the prior months, being hailed as the “worst week” for the ASX in six months. Over five sessions, the index dropped 3.9 per cent. This is not surprising considering the growing tension surrounding the US Election coupled with concerns over the worsening pandemic condition bringing investment anxiety and uncertainty. Over the sea, the Dow Jones Industrial Average slipped 943 points during the week as investors lose confidence over business shutdowns and the efflux of COVID-19 cases. This has spurred rampant selling on the S&P 500 with over 90 percent of stocks finishing lower this week.

In our own backyard, CBA, Rio Tinto and AMP were a few of winners that experienced gains over the week, with AMP soaring around 20 percent. Afterpay, Woolworths and a cluster of travel and recreation stocks fell after the announcement of Queensland’s renewed Victoria and NSW border closures. The national ‘travel travesty’ has culminated into huge losses for our tourism services, which usually enjoys over $39.1 billion in spending from international visitors. Globally, the International Air Transport Association has urged governments to inject more finances into the creation of travel bubbles to help boost demand for international travel. Specifically, this comes as American Airlines Group and Cathay Pacific Airways continue to burn their finances, with the latter laying off more than 5000 jobs.

Spending. Spending. Spending. Phillip Lowe has stressed the importance of incentivising business and investment activity as we emerge out of a recession. This comes as Deputy governor Guy Debelle revealed that our national economy throughout the September quarter, claiming that this was a sign that we have climbed of a technical recession.

In the housing market, the reduction in opportunities to spend has led mortgage offset accounts to swell 10 per cent since the start of March. However, the worse may not be over for mortgagors as mortgage delinquency rates continue to rise, reaching a precipice of a seven-year high in NSW. Exacerbated by Queensland’s announcement of continued border closes, delinquencies are predicted to worsen in suburbs and areas that are reliant on tourism and retail. With the refinancing of mortgaging soaring over 50 percent from January to June, new data has revealed that suburbs such as Ashcroft have almost 5.8 percent of mortgages in arrears. With economic conditions remaining uncertain, it is likely that these numbers will remain high until business activity becomes steady.