23 Jun 2017
Interest-only rates on the rise
Markets
- Equity markets finished mixed with the local and US markets down, Asia up, and Europe rather flat.
- Global ratings agency Moody’s has downgraded the big 4 banks and 8 other institutions over fears about the housing market. This follows S&P’s recent downgrade of the banks. Moody’s does not expect a sharp downturn in housing, but it couldn’t ignore the risk that high levels of debt and rapid growth in debt could pose going forward.
- Westpac is continuing to increase rates on interest only mortgages with the most recent increase coming in at 0.34%. At the same time, the bank has lowered interest rates on owner occupied principal and interest loans. Expect that activity to continue and to continue across all 4 banks.
- Tabcorp received the green light from the competition regulator to complete its $11bn takeover of Tatts Group, with the company now working towards implementation of the deal in August.
- Telstra will cut around 1,400 jobs across the country as part of a huge cost-cutting drive that could reduce their workforce by nearly 5%. Employees across all divisions are likely to be affected. Competition is heating up and Telstra has one of the most bloated workforces in the country.
- Sydney Airports has reported very strong international traffic growth and solid domestic growth for the month of May. Asia is continuing to drive growth with almost 1 million additional seats being announced in 2017.
- QBE provided a negative update to earnings, the result of its emerging market business experiencing higher claims in the first 5 months of the year. Their 3 largest divisions remain on track for expectations. The market didn’t take kindly to the emerging market news.
- The oil price continued to fall this week with supplies and inventories coming in on the high side of expectations.
Economics
- US economic data appeared softer with housing starts and building permits both falling along with consumer sentiment also printing lower. Inflation remains too low. The economy may not be absorbing recent rate rises too well.
Politics
- The International Monetary Fund has agreed to join the Greek bailout program. Whilst their proposed involvement appears to be minor, any involvement from the IMF is likely to bring the Greek debt issue to a resolution much quicker than progress made to date.
- French President Macron’s En Marche party has secured a solid majority in the second and final round of the parliamentary elections, confirming his support.
- Formal Brexit negotiations have begun less than 2 weeks after UK PM May and her Conservative Party lost their absolute majority in parliament following the general election. Negotiating from a position of weakness is never ideal.
