Dow jumps more than 750 points, local focus is on the banks ahead of the RBA

The Morning Wrap

Livewire Markets

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.

NOTE: Due to the start of daylight savings in parts of Australia, US markets now shut at 7 am AEDT, rather than 6 am, AEST. 


  • S&P 500 - 3678 (+2.59%)
  • NASDAQ - 10815 (+2.27%)
  • CBOE VIX - 30.18
  • USD INDEX - 111.64
  • US 10YR - 3.649%
  • FTSE 100 - 6909 (+0.22%)
  • STOXX 600 - 390.83 (+0.77%)
  • UK 10YR - 3.959%
  • GOLD - US$1702/oz
  • WTI CRUDE - US$83.63/bbl (+5.2%)

  • Dow surges more than 750 points as stock claw back from brutal September

  • UK government reverses scrapping of 45p tax rate in embarrassing climbdown

  • US home prices posting biggest monthly declines since 2009
  • EU to give capitals more say over debt-reduction plans
  • China accelerates measures in an attempt to shore up confidence in the real estate sector
  • Inflation faster and broader in energy-squeezed euro area vs the US
  • Japan's business mood declines in third quarter in Tankan survey
  • Australia house price decline slows in September
  • PBOC to lower interest rates for housing provident loans for first time buyers
  • RBA set for one final outsized rate hike before slowing
  • Credit Suisse shares slump as CEO statement to reassure fails to calm markets
  • OPEC+ plans substantial oil production cut to support prices
  • Global gas markets to remain tight next year amid supply squeeze 


Today's graphic comes from Morgan's Asset Allocation update for Q4 2022. The supporting commentary that goes with the graphic highlights Morgan's preference for "assets with defensive characteristics, inflation protection and lower correlation to the economic cycle." The key takeaway is as follows; "investors are advised to be nimble with their cash holdings."

Morgans points to a relatively bleak economic outlook, although Australia should fare better than most given we are net exporters of raw materials. Other headlines include: 

  • The global economy is headed for a likely recession
  • Most major central banks will press on with tightening due to uncomfortably high inflation
  • Europe will succumb to recession amid higher energy prices and subsequent terms of trade shock
  • China's economy will continue to struggle with a property slump, fading export demand, and limited policy support 
  • Energy commodity prices will remain high amid supply disruption and non-energy commodities don't have much further to fall


It's all about the RBA decision today. The market is pricing in an 80% chance of a 50 basis point hike. If it comes to fruition, it would the sixth hike in as many months. Some economists believe that the central bank will only hike by 25 bps, particularly in light of the recent turmoil in international markets, in particular the surge in the price of the UK government debt. 


In short, the focus is on the banks - particularly ahead of today's RBA decision. A recent note from Macquarie notes slowing growth and competition has been partly offset by deposit tailwinds. Housing credit growth has continued to moderate whilst competition for mortgages remains intense. Retail deposit spreads continue to be highly lucrative, providing meaningful margin upside in the next six months. 

Amongst the winners, National Australia Bank (ASX: NAB)  and Westpac (ASX: WBC)  have grown ahead of their peers, growing at around system. Commonwealth Bank (ASX: CBA) has grown at 0.7x system, whilst ANZ Banking Group (ASX: ANZ) continues to struggle to arrest its market share decline. Regionals are growing well below system.  


Sticking with the banks, the chart above comes courtesy of Morgan Stanley and shows housing loan growth over the past year. Bedigo and Adelaide (ASX: BEN) has been growing above system over the period, although, as mentioned above, that is no longer the case. NAB is the only major to be above system, whilst ANZ is languishing badly over the past year.

Chris Conway wrote today's report. Hans is on leave.


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The Morning Wrap
Markets Wrap
Livewire Markets

Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Kerry Sun.

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