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Dividends buoy banks as mortgage growth slumps

The Australian sharemarket lost ground as Chinese stocks fell and the upbeat Reserve Bank monetary policy statement signalled no rate-relief for the mounting domestic housing credit crunch.

But with ANZ and Westpac still trading cum dividend until next week the financial sector held on to limit losses on the S&P-ASX, and after a late closing-auction spike from a 0.4 per cent loss, it finished down 6.4 points, or 0.11 per cent, at 5921.8 as bank investors shrugged off the 14 per cent year-on-year slump in home loans.

The ASX was little changed in early trade after the US S&P 500 index lost 0.3 per cent last night, but selling pressure increased as Shanghai stocks fell to a 1.3 per cent loss at the lunchbreak.

The Australian dollar fell US0.6¢ to US72.40¢ as housing finance decelerated and despite the Reserve Bank confirming its improved outlook and dismissed evidence of consumer fragility by saying “higher interest rates are likely to be appropriate at some point”.

But it also noted that “the prospect of continued low growth in household income remains a risk to the outlook for household consumption, especially given high levels of household debt”.

VideoLu Ting, chief China economist at Nomura International, discusses China’s economy and policies.

Total new home loan’s fell 3.7 per cent in September, with investment lending falling 2.8 per cent and owner-occupier lending tumbling 4.2 per cent.

UBS economist George Tharenou said their long-held forecast of a housing peak-to-trough drop of 20 per cent “ increasingly looks like heading to minus 30 per cent”.

Westpac economists said despite the Reserve’s upbeat mood, “we assess that the risks are mounting around the consumer and housing as lending conditions tighten further”.

“We remain comfortable with our view that the RBA is on hold this year, through 2019 and during 2020.”

ANZ strategists said the recent squeeze in risk assets has been sharp and, “while we don’t rule out further improvement in the very near term, we do not see it as sustainable”, suggesting it might be a “dead-cat bounce”.

They said the global political landscape was “fragile, liquidity is easing back and global growth is decelerating”.

ANZ global leading index fell into negative territory for the first time in two years.

“More slowing in industrial momentum is likely,” they said. “This story is in stark contrast to the end of last year/start of this year when our indicator was well above trend.”

Confirming this, Brent crude oil fell 2 per cent to $US70.70 a barrel, leaving in a technical bear market with a 21 per cent decline since early October.

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