The stock market looks set for a weak opening today as investors assess negative news on a number of fronts.
Westpac’s announcement that it will increase its variable mortgage rate by 0.2% to compensate for the negative impact of having to raise additional capital is a reminder that regulatory safety initiatives invariably come at a cost. This move, especially if followed by other major banks is likely to dent consumer and property investor confidence, at least initially. This bank rate hike represents a degree of tightening which may increase pressure on the RBA to cut official rates in future.
US markets provided a weak lead for the local market and this won’t be helped by the fact that J. P Morgan’s result, released after the market closed, missed expectations. While the stock was down only 1.5% in after-hours trading, JP Morgan is the first of the major banks to report and this will increase nervousness about performance of the financial sector generally.
This morning’s market sentiment will not be helped by further declines in commodity prices overnight. While China’s weaker than expected import data appears to have dampened sentiment towards commodities, the fact that this was more about price declines than a drop in import volumes may help stem the extent of concerns on this front.
The combination of weaker commodity prices and news of Westpac’s rate hike is a negative for the Aussie dollar and may be a source of relative support for Australian stocks with positive exposure to a weak currency.