Bank stocks help ASX stay steady as Wall Street falls over inflation worries

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The Australian share market is trading sideways as solid gains from the major banks are offsetting sharp falls across mining stocks.

Wall Street closed the week in retreat after comments from US Federal Reserve chair Kevin Warsh about inflation saw interest rate head higher and equity markets lower.

Follow the day's financial news and insights from our specialist business reporters on our live blog.

Disclaimer: this blog is not intended as investment advice.

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By Stephen Letts

Prices current at around 12.30am AEST

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By Stephen Letts

The ABS has also just released its quarterly update on Australia's mineral and petroleum exploration expenditure and it's fair to say the drill rigs have been flat out in recent months.

In seasonally adjusted terms, petroleum exploration expenditure jumped 24% to $584 million over the quarter. That's 76% higher than a year ago.

Things have been a bit more sedate amongst the rock kickers.

Mineral exploration expenditure grew 4% (s.a.) over the quarter to $1.1 billion, 18% higher than a year ago.

Unsurprisingly, gold recorded the largest rise in expenditure, up 23.6% to $566 million, while iron ore exploration costs also rose more than 23% to $235 million.

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By David Chau

Bathla Group, which is on the brink of collapse, does not have enough money to survive until the end of this week — unless it secures urgent funding.

Administrators of the struggling property development firm have just delivered a press conference, and the outlook is grim.

"We can't go to the end of the week if we don't have money for payroll on Thursday," said Stephen Longley, Teneo's senior managing director told reporters outside Bathla's office in western Sydney.

"We don't have any cash to pay wages [and] we don't have any cash to pay suppliers.

"So unless that situation can be resolved, we won't have any other option but to close the business."

Teneo was appointed as the company's administrator last Tuesday as Bathla was unable to pay debts of around $3.2 billion.

We'll have more info on this development shortly.

By Stephen Letts

The latest batch of Q2 GDP partials are out with gross company profits up 1.8% over the quarter (seasonally adjusted) and 7.4% over the year.

Miners led the way with profits (Company Gross Operating Profits — CGOP) up 6.8% over the quarter, while manufacturing profits gained 1.3%.

These were partially offset by 5.2% fall in retail trade profits and a 2.9% decline in wholesale trade profits.

Also included in the broad business indicators quarterly release, wages and salaries were 1.4% higher, to be 5.4% higher over the year.

Inventories fell 0.2% which on face value may be a drag on GDP, but IFM Investors chief economist Alex Joiner says there's a likely payback in exports which may be revealed in current account figures tomorrow.

"Business indicators for Q2, private non-farm inventories to subtract 0.3ppts from real GDP in the quarter, this was due to a big run down in mining inventories so there's likely a little growth payback in resources exports," Dr Joiner said.

Key Event

By Stephen Letts

The ASX 200 has edged higher having recovered from an opening slip.

At 11:05 am (AEST):

The financial sector is leading the way supported by non-discretionary retailers, while miners and tech stocks have been a drag.

The big four retail banks have made solid gains, as have the insurers. Westpac and Suncorp are up 2% and 1.2% respectively.

Oil and gas producers, as well as the fuel refiners and retailers, have risen in line with rising oil prices this morning. Locally focussed Beach Energy is up 1.7% and Ampol has gained 1.5%.

In retail, supermarkets are enjoying a bounce this morning. Woolworths is up 1.8% while the more discretionary retailer Harvey Norman is down 2.2%.

Tech stocks are lower after US stocks on the Nasdaq fell on Friday.

Data centre related stocks are particularly out of favour with Megaport down 3.3% and NextDC down almost 2%.

The miners are generally lower. BHP is down 1.7%, while gold miner Northern Star has shed 4.6% thanks to a lower spot price and on-going upheaval in its senior management ranks.

The ASX top movers include digital property exchange PEXA which has climbed 8.7% despite a couple of broker downgrades.

Lithium miner Liontown is up 2.7% after announcing its maiden profit.

The bottom movers list is headed by laser enrichment business Silex Systems (-10.2%) and populated by other uranium related stocks and gold miners.

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By David Chau

Now that we're into the second hour of the trading day, the Australian share market is faring a little better.

The ASX 200 has risen 0.1% to 9,104 points.

So it has recovered from this morning's slight fall of 0.2%.

The big miners BHP (-1.1%) and Rio Tinto (-0.7%) are weighing on the market. Indeed, materials (-1.9%) is today's worst performing sector.

On the flip side, banks are doing the heavy lifting and keeping the ASX out of negative territory, for now.

Shares of Westpac, Commonwealth Bank, ANZ and NAB have risen by around 1.5% to 2.1%.

Key Event

By Stephen Letts

Investment banking giant Morgan Stanley has changed its call on Australian interest rates, saying it now expects the RBA to raise its official cash rate next month.

Morgan Stanley's Australian strategy team says strong July inflation has crystallised upside risks the RBA warned it would act against.

In a research note this morning, Morgan Stanley is tipping a 25-basis point rise to 4.6% at the next RBA meeting on September 29.

The market consensus is still that the RBA will keep its powder dry in September, with odds of a hike in December shortening.

"The July CPI was stronger than we, consensus, and the RBA expected" Morgan Stanley's Chris Nichol and Chris Read wrote.

"The sequential acceleration was broad-based, including a sharp rise in important categories such as market services.

"Despite volatility in the monthly data, the beat was large enough that achieving the RBA's Q3 core CPI forecast of around 0.8%Q now looks very challenging, even assuming a sharp deceleration over the next two months.

"In our view, this print meets the threshold for the "upside risks" to inflation the RBA flagged at its August meeting and said it would act against."

By Stephen Letts

Prices current at around 10:20am AEST

Live updates on the major ASX indices:

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By Stephen Letts

The ASX 200 has slipped 0.2% to 9,076 points on opening (10.00 am AEST).

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By Stephen Letts

Troubled fertility business Monash IVF has reported a 41% drop net profit to $16 million.

The result was below management's revised FY26 NPAT guidance of $17m-$18m, with the miss attributable to a post-tax $1.4m write-off of prepaid assets.

Revenue slipped by 1%, roughly in line with consensus expectations, while the final dividend of 1.3 cents per share beat expectations.

The company also announced a renewal of its board with experience director and former Nine Entertainment chair Catherine West replacing current chair Richard Davis.

Two other long serving directors will also be replaced.

Monash IVF has suffered recent reputational damage with two embryo mix ups coming to light last year.

Earlier this year, the company rebuffed a $350 million takeover offer from a consortium of ASX listed investment vehicle Washington H. Soul Pattinson and private equity group Genesis Capital.

Key Event

By Stephen Letts

Shipbuilder Austral has seen its profits torpedoed by what it says are the "onerous contracts" it has with the US Department of War.

The non-cash provision relating to the US contracts saw last year's $90 million net profit swing to a $54 million loss in FY26.

This was despite an 11% increase in revenues to more than $2 billion.

Austal CEO Peter Gregg the result was dragged down by the US Department of War rejecting a request for relief from contracts he described as "onerous".

"We have commenced the longer, formal process to recover the value on these contracts and our position is supported by a documented factual and contractual record," Mr Gregg said in a statement to the ASX.

Austal's Australian operations did better with pre-tax earnings more than doubling to $85 million.

Austal currently has a record $5+ billion order book stretching out over 12 years.

The company won't pay a final dividend.

Key Event

By Stephen Letts

It's now eight years since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry started examining some of the the sector's more dubious/illegal operations, but the process of remediation is still slowly rolling along.

In its action against Colonial First State Investments, Avanteos Investments and the Commonwealth Bank, Slater and Gordon Lawyers has finally landed a $249 million in principle settlement of a class action.

The proceedings commenced in 2018 as part of Slater and Gordon's "Get Your Super Back" series of class actions in the wake of the 2018 banking royal commission.

The settlement is still subject to Federal Court approval and was reached without Colonial First State, Avanteos or CBA admitting liability.

Here's more from Slater and Gordon's statement this morning.

"At its heart this case was about the alleged conflict between CFSIL, AIL and CBA's interests in profiting from members' savings, and CFSIL and AIL's duties as trustees to do the best they could for their members. The case alleged CFSIL and AIL failed to properly manage that conflict," said Nathan Rapoport, class actions practice group leader at Slater and Gordon Lawyers.

"Superannuation trustees must prioritise their members' interests over their own. If any superannuation trustees might be at risk of forgetting the lessons from the banking royal commission, the settlement in this case should serve as a reminder."

The case alleged that group members' retirement savings were reduced through the payment of low interest rates on certain cash and deposit investments with CBA offered through Colonial First State superannuation and wrap products, CFS FirstChoice and FirstWrap and Commonwealth Essential Super, between November 2008 and September 2021.

It was alleged that CFSIL and AIL did not act in the best interests of their superannuation fund members when they invested members' retirement savings with their parent bank CBA without trying to obtain the best interest rates available for their members.

It also alleged that CFSIL and AIL received undisclosed payments from CBA which incentivised them to invest members' savings with CBA at lower rates, and that CBA benefited by obtaining access to members' savings at low interest rates.

Slater and Gordon's case alleged that the cash and deposit investments at the centre of the proceeding did not provide members with the returns they were reasonably entitled to expect, and that in total members lost millions in aggregate retirement funding.

Key Event

By Stephen Letts

Oil prices have opened higher this morning after fresh missile attacks in the Strait of Hormuz.

At 8:15am AEST the key global benchmarks were around $US2/barrel higher.

The spike follows a US strike on two Iranian launchers on Iran's Larak island in the Strait of Hormuz on Sunday, the first known American strikes on the Gulf nation since late July.

The US action was in response to reports that another tanker was hit trying exit the Strait.

Key Event

By Stephen Letts

WA-based lithium miner Liontown has posted its first profit thanks to higher prices and increasing production and sales.

Liontown swung from a $193 million loss last year to $93 million net profit after tax in FY26.

Its underlying profit, stripping out exceptional items, was $14 million.

Production and sales rose by about a third, while the realised price of its lithium concentrate jumped by around 60% in Australian dollar terms.

Liontown's cash balance at the end of the year was 260% higher at $561 million.

By Stephen Letts

An ABC investigation has discovered gift cards that have been tampered with are being sold by Australia's biggest supermarkets, with charges even being laid over the issue.

It is leaving shoppers confused and stressed, and raising questions about whether this is linked to a multi-billion-dollar criminal scam.

The investigation by Emilia Terzon and Eric Hao Zheng is well worth your time to read.

By Stephen Letts

Australia:

Mon: Company profits, inventories (Q2), Private Sector Credit (Jul), MI Inflation Gauge (Aug)

Tue: Balance of Payments (Q2), Building Approvals (Jul), Home Prices (Aug)

Wed: GDP (Q2)

Thu: Trade Balance (Jul)

International:

Mon: CN — NBS "official" PMI (Aug)

JP — Industrial Production (Jul)

Tue: CN — Rating Dog/S&P Global PMI

EZ — CPI (Aug)

US — ISM Manufacturing (Aug)

Wed: NZ — RBNZ rates decision

CA — BoC rates decision

US — Factory Orders (Jul), Durable Goods (Jul)

Thu: US — Trade Balance (Jul)

Fri: US — Non-farm payrolls/unemployment (Aug)

It's a busy week on the local macro front with second quarter GDP set to be published on Wednesday.

But before we get there, there are a couple of GDP partials that need to be fed into the equation.

Later this morning we will get Q2 Business indicators — company profits and inventories.

Company profits are expected to rebound after a Q1 decline as mining exports are expected to be higher after Q1's weather impacted results.

Inventories are likely to be a positive for GDP growth with imports of consumer goods, particularly cars, increasing across the quarter.

The final piece of the GDP puzzle, the Q2 Current Account Balance, is released on Tuesday.

The deficit is expected to have widened around $3 billion to $30 billion, but there should be a positive contribution from the primary income balance.

The overall Current Account/Balance of Payments contribution is expected to around zero.

For GDP itself, the market is expecting 0.4% growth in Q2, delivering an annual rate of a modest 1.9%. However, the picks vary from flat over the quarter to 0.6%.

CBA is forecasting the average of 0.4% growth.

"This would provide evidence that the economy is slowing which is required to bring the economy back to balance over time," CBA said.

Here are CBA's key component forecasts

Also, this week, we get the latest reading on home prices via Cotality's Home Value Index (Tuesday).

National home prices are forecast to fall another 1.2%, which would be the largest monthly decline in the current downturn, although it could equally be said that home affordability will increase by 1.2%.

Dwelling approvals for July will also be released on Tuesday.

It's a volatile series, driven by apartment approvals, so the market is forecasting a decline in July given the jump June approvals.

Across the ditch, the RBNZ is expected to raise rates for the second consecutive meeting, up 25 bps to 2.75% with inflation there now above 4%.

The Bank of Canada also holds a rates meeting on Wednesday but is likely to remain on hold at 2.25%.

By Stephen Letts

Wall Street's key indices closed lower after Federal Reserve Chair Kevin Warsh reiterated the central bank's focus on fighting inflation, increasing prospects for a rate hike.

Without confidence that inflation is heading clearly and with sufficient speed to the Fed's 2% goal, the central bank would have "more work to do," Mr Warsh said in his first Jackson Hole speech to fellow central bankers.

That saw early gains in US equities fade, while European markets had already closed and finished the session with handy gains.

ASX 200 futures trading closed on Saturday morning (AEST) pointing to a 0.4% decline today.

However, the S&P 500 still gained 0.5% over the week, while the ASX 200 picked up 0.4% snapping a two-week losing streak.

The Nasdaq was hit by a 4.3% drop in Nvidia shares and Marvel Technology fell more than 10%, however the megacaps Alphabet (+1.7%) and Apple (+1.6%) made solid gains.

Traders added to bets on a September rate hike after Mr Warsh also said he felt recent inflation data did not suggest a change in trend.

After the comments, bets that rates would be raised at the September meeting rose to a 56% probability from 35% on Thursday, according to CME Group's FedWatch tool.

Three Fed officials have already warned about sticky inflation, but Mr Warsh had previously resisted giving forward guidance on the path of interest rates.

"The crisp mountain air of the Grand Tetons may have helped bring clarity of speech to Fed Chair Warsh, who marked his 100th day in the job by offering seven principles to navigate by," NAB's Head of Rates Strategy Ken Crompton wrote in a note this morning.

"He gave no undertaking as to where the path ends — but left no doubt that underlying inflation trends are bringing him no comfort: the Fed must be confident inflation is heading to target 'clearly and at sufficient speed. Otherwise, we have work to do.'"

Traders are now split between a rate hike and a hold in September, as they were before inflation data this month painted a mixed picture.

"Why the market is modestly reacting is he (Warsh) is very adamant that the 2% inflation target is going to remain. He is reiterating the hawkishness, but in a more of a consistent way than an incremental way," chief market strategist for Nationwide, Mark Hackett told Reuters

"There's been somewhat misguided thoughts among investors that this would soften a little bit. Clearly, that's not the case."

MSCI's gauge of stocks across the globe slipped 0.1% on Friday, while the pan-European STOXX 600 index gained 0.5%.

In the bond market, the 2-year note, which typically moves in step with Fed interest rate expectations, rose sharply 12.79 basis points to 4.36%.

The yield on benchmark U.S. 10-year notes rose 5.6 basis points to 4.728%, while the 30-year bond yield rose 2.19 basis points to 5.2129%.

In foreign exchange markets, the US dollar jumped against other major currencies and was on track for its biggest daily climb in more than 2 months on the prospect of rising rates.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.6% to 99.71, although the Aussie dollar remained relatively unmoved at 71.58 US cents, just below its four-month high.

The Aussie was the best performing of all G10 currencies against the US dollar last week.

Oil slipped a tad on rumours that the Strait of Hormuz would soon reopen to shipping.

Gold fell more than 3% as the US rate-hike expectations spread. Silver fell 4%.

With Reuters

By Stephen Letts

Prices current at around 7:00am AEST

By Stephen Letts

Good morning and welcome to another day on the ABC markets and finance blog.

Stephen Letts from ABC business team limbering up for a blow-by-blow coverage of the day's events, where every post is hopefully a winner, but none should be construed as financial advice.

Wall Street closed the week on a negative note, with the S&P 500, slipping 0.3% but still gained 0.5% over the week.

The ASX also looks like losing ground today

When trading closed on Saturday morning, ASX 200 futures were pointing to a 0.4% decline today.

Data-wise it's a busy day ahead with more Q2 GDP partials being released. Company profits and inventories will be fed into Wednesday's Q2 National Accounts equation at 11:30am.

China's National Bureau of Statistics will publish its "official" August Purchasing Managers' Index (PMI) survey.

The August reporting season also wraps up today with Monash IVF (if its auditor's report is ready - there was doubt last week), Michael Hill International and Coventry Group scheduled to release results.

The interesting ones though maybe dropped in the witching hour for laggards, those hoping to bury their results, somewhere between 5.00pm and midnight.

As always, the game's afoot, so let's get blogging.

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