CBA result to steady market nerves
Short term relief about the banking sector is likely to steady nerves, at least temporarily in early trading. A solid profit result from CBA coincides with Deutsche Bank’s stock price climbing off its low in late New York trade.
None of the concerns markets have about banking stocks are yet apparent in CBA’s result. Investors are likely to be pleased with solid volume increases in CBA’s business. CBA has been able to achieve these volume gains while keeping its net interest margin flat. Given CBA’s dominant position in the Australian economy, this suggests underlying conditions in the broader economy although patchy, are reasonable in the aggregate.
CBA’s result today reveals that 78% of its home loan customers are paying their mortgages in advance by an average of 29 months. This provides a considerable buffer against any downturn in the employment or housing markets. However, Australian bank interest margins could still be pressured by any significant increase in international credit margins should concerns over European banks continue to rise.
Another sell-off in oil prices will be a sobering note for today’s trading. Last night’s big drop in oil creates the possibility of a test of the late January lows. A move to new lows in oil would be a blow to market confidence, raising concerns about the potential for bad debts in the energy sector and increased pressure on international credit markets.
Janet Yellen’s testimony before Congress over the next two days could be a significant market event with potential to either calm market or inflame market nerves. Markets will be focussed on her comments on credit markets. They will also be focussed on what she has to say about the possible impact of recent volatility and US economic statistics on the Fed policy.
Japan’s stock market will be among the many things traders will need to focus on today. Ongoing strength in the Yen will have the market on tenterhooks again. Another bad day for the Nikkei Dow will be a negative for regional sentiment.
Frequently Asked Questions about this Article…
CBA's solid profit result is likely to steady investor nerves, at least temporarily, as it coincides with positive movements in Deutsche Bank's stock price. This suggests that concerns about banking stocks are not yet apparent in CBA's performance, which should please investors.
CBA's data shows that 78% of its home loan customers are paying their mortgages in advance by an average of 29 months. This provides a significant buffer against potential downturns in the employment or housing markets, indicating a relatively stable housing sector.
Yes, Australian bank interest margins, including those of CBA, could be pressured by any significant increase in international credit margins, especially if concerns over European banks continue to rise.
The recent sell-off in oil prices could test the late January lows, potentially affecting market confidence. This raises concerns about bad debts in the energy sector and increased pressure on international credit markets.
Janet Yellen's testimony is significant because it could either calm or inflame market nerves. Markets will be closely watching her comments on credit markets and the potential impact of recent volatility and US economic statistics on Fed policy.
Ongoing strength in the Yen could keep Japan's stock market on edge. A bad day for the Nikkei Dow, influenced by Yen strength, could negatively impact regional sentiment.
CBA's ability to achieve solid volume increases while maintaining a flat net interest margin suggests that, despite some patchiness, the underlying conditions in the broader Australian economy are reasonable in aggregate.
Traders should focus on several factors, including Janet Yellen's testimony, the strength of the Yen, and the performance of Japan's stock market, as these could all significantly influence market sentiment and trading outcomes.
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