The Australian sharemarket remained in erratic mode but after some wide-ranging, low-volume swings it still managed to avoid the worst of Asian market weakness as the major banks rallied despite Westpac’s poor earnings report.
The S&P-ASX 200 index opened 0.5 per cent down after Wall Street dropped 0.7 per cent on Friday after the Trump administration dashed hopes a China trade-deal was in the making.
But the domestic benchmark rallied-hard in late morning trade to a 0.2 per cent gain with all the hallmarks of a major-bank short-squeeze, before sliding again to close down 31.1 points, or 0.53 per cent, at 5818.1 with public-holiday-affected volume about 20 per cent below average.
Westpac rallied from the red to a one percent gain before closing per cent after reporting a sharp contraction in its net-interest margin.
UBS analyst Jonathan Mott said it was a “subdued result that reflects the environment” and that the 26 point reduction in its consumer-banking interest margin “could raise and eyebrow”.
“With credit impairment charges at just 9 basis points – it’s second lowest level ever recorded – asset quality is very unlikely to remain a tailwind,” he said.
The Australian dollar dropped US0.6¢ from Friday’s China trade-deal highs to US71.90¢ after an improvement in US non-farm payrolls and higher wage growth lent support to the US dollar.
Government 10-year yields rose 3.3 points to 2.728 per cent and US 10-years were up 6 points at 3.21 per cent.
Fidelity International global economist Anna Stupnytska said using both a macro and a bottom-up approach, their base case was for a Democratic House of Representatives and a Republican Senate at this week’s mid-term elections.
On that basis US GDP growth was likely to disappoint, coming in below the current Bloomberg consensus of 2.5 per cent in 2019 and 1.9 per cent in 2020.
“The main driver behind the slowdown will be the combination of fading fiscal stimulus and tighter financial conditions – a reversal of trends that boosted the US economy throughout 2017-2018,” she said.
The Shanghai composite index was down one per cent at the close of the ASX.