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The share market looks likely to drift lower this morning with little obvious reason to bring buyers back to key mining and bank stocks in any strength.
The 49.8 read in China’s official manufacturing PMI leaves intact the consensus outlook for soft conditions in the heavy manufacturing sector. Given the recent downward drift in iron ore and copper prices, the weekend’s PMI figure is probably more a negative than a positive for mining stocks today.
Westpac’s profit result and outlook statement held few surprises as it released summary data two weeks ago with its capital raising announcement. The potential for slower growth in housing lending will be a negative for banks. However, the improved business lending evidenced by last week’s data is a welcome development that may help offset this to some degree. The chances are that difficult trading conditions which were a drag on institutional banking profits in the last half will be a temporary phenomenon providing potential to recover in this area during the current year.
This morning’s release of Building Approvals data for September will be an interesting number leading into tomorrow’s RBA meeting. Momentum has begun to stall in recent months. This suggests that dwelling construction’s contribution to overall GDP growth in Australia is going to decline. If this trend is confirmed, the relative importance of nascent recoveries in other areas of the economy such as manufacturing and tourism will only increase.
Frequently Asked Questions about this Article…
The share market is likely to drift lower due to a lack of strong reasons to attract buyers back to key mining and bank stocks. The recent downward trend in iron ore and copper prices, along with soft conditions in China's manufacturing sector, contribute to this outlook.
China's official manufacturing PMI reading of 49.8 indicates soft conditions in the heavy manufacturing sector. This is generally seen as a negative for mining stocks, especially given the recent decline in iron ore and copper prices.
Westpac's profit result and outlook statement were largely as expected, with a potential negative impact from slower growth in housing lending. However, improved business lending could help offset this, suggesting a mixed impact on the banking sector.
The recent Building Approvals data indicates that momentum in dwelling construction has begun to stall. This suggests a potential decline in its contribution to Australia's GDP growth, highlighting the growing importance of recoveries in other sectors like manufacturing and tourism.
The RBA meeting may consider the stalling momentum in building approvals and the potential decline in dwelling construction's contribution to GDP. This could shift focus to the importance of recoveries in other economic areas such as manufacturing and tourism.
The outlook for institutional banking profits is cautiously optimistic. Although difficult trading conditions have been a drag recently, there is potential for recovery in this area during the current year.
Improved business lending is significant for banks as it can help offset the negative impact of slower growth in housing lending. This development is a positive sign for the banking sector's overall health.
If dwelling construction's contribution to GDP declines, sectors like manufacturing and tourism may gain relative importance. These areas could become key drivers of economic growth in Australia.
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