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Big Four surge on lending law backflip; ASX heads for best week in six

ASX investors continue to pile into the big banks on the impending easing of responsible lending laws, with the financial sector a clear leader in early afternoon trade.

Commonwealth Bank was 3.7 per cent higher at $66.59, Westpac 7.2 per cent ahead at $17.54, NAB up 6.7 per cent at $18.32, and ANZ 5.4 per cent at $17.79.

Bendigo and Adelaide Bank was up 4.4 per cent and the Bank of Queensland 3 per cent. It is shaping up to be the financial sector’s best day in three months.

The Australian sharemarket was ahead 1.5 per cent at noon and earlier rose by as much as 1.6 per cent to a two-week high 5973.7. It is easily leading the Asian sector and on track for its best week in six.

The big miners were also strong, with BHP up 2 per cent and Rio Tinto 1.4 per cent. Biotech CSL, Fortescue Metals, and Wesfarmers were narrowly ahead while supermarkets Woolworths and Coles dragged.

US futures were up 0.5 per cent at noon.

It was an astonishing claim to make. When Elon Musk took to a makeshift stage in the car park outside his California factory and pledged to manufacture 20 million electric cars per year by 2030, it betrayed the scale of his ambition.

That figure is almost double the volume produced by Volkswagen – currently the world’s biggest carmaker – and a quarter of the total of 80 million cars produced per year by every manufacturer in the world. It also represents a colossal jump from the 360,000 vehicles Tesla produced last year. Can he get there?

Elon Musk's latest plan left investors underwhelmed, but if history is any guide, it isn't wise to bet against him.

Elon Musk’s latest plan left investors underwhelmed, but if history is any guide, it isn’t wise to bet against him. Credit:AP

It seems doubtful. From Wolfsburg to Tokyo plenty of people in the global car industry will today be quietly scoffing at the prospect.

But they have scoffed before and it is Musk – the world’s third-richest man whose company is now worth $US395 billion ($560 billion), or more than VW, GM and Ford combined – who is laughing now.

Full story here, via the Telegraph London 

Australia’s leading consumer rights groups have slammed the government’s proposal to remove responsible lending laws, calling the plan disastrous as people have too much debt and not enough income in the COVID-19 crisis. Banking shares skyrocketed.

The new rules would strip the Australian Securities and Investments Commission off the oversight of responsible lending for the banks, leaving only the prudential regulator to ensure whether a bank’s lending practices puts its stability at risk. Under the rules proposed by Treasurer Josh Frydenberg, responsible lending will be replaced with the concept of responsible borrowing.

Carolyn Flanagan, a blind pensioner, appeared at the banking royal commission after she was left homeless because of a Westpac loan.

Carolyn Flanagan, a blind pensioner, appeared at the banking royal commission after she was left homeless because of a Westpac loan. Credit:Elke Meitzel

The new rules are expected to face stiff scrutiny in the Senate, with the Greens vowing to fight the changes.

Bank share prices soared on the prospect of the looser rules, with Commonwealth Bank up 2.4 per cent, Westpac up 7 per cent, National Australia Bank up 5.6 per cent and ANZ up 4.7 per cent shortly after midday on Friday. The big four had added a combined $13.7 billion to the market cap of the S&P/ASX 200 by 12.30pm.

Full story here

Expectations of an October rate cut spiked this week but Commonwealth Bank expects the cash rate to remain at its record low 0.25 per cent when the RBA board next meets.

Westpac chief economist Bill Evans this week tipped a rate cut to 0.1 per cent on October 6, tipping the accompanying federal budget to provide a tandem “team Australia” moment for the economy.

Reserve Bank of Australia boss Philip Lowe.

Reserve Bank of Australia boss Philip Lowe. Credit:Louie Douvis

Mr Evans’ view followed a speech by Deputy RBA governor Guy Debelle who, among other things, discussed ‘other’ options for monetary policy.

Several analysts now expect policy easing at the October board meeting, with markets pricing in a broadly 60 per cent chance that the RBA cuts the cash rate.

CBA economist Garth Aird isn’t as sold.

“It is our assessment that there has been an overreaction to the content of Debelle’s speech,” Mr Aird said in a note.

“And we do not look at the speech in isolation, but rather overlay it with other recent communication from the RBA Governor and policy decisions from the RBA. We believe the RBA will be acutely aware that the potential costs and risks of doing so at this juncture outweigh the potential benefits.

Mr Aird said the RBA has been adamant that negative rates are ‘extraordinary unlikely’ and they has generally implied that the costs outweigh the benefits.

“But tinkering with the cash rate in a very fine corridor between 0.0 per cent and 0.25 per cent carries the risk of other important short‑term rates falling into negative territory,” he said.

ASX investors continue to pile into the big banks on the impending easing of responsible lending laws, with the financial sector a clear leader in early afternoon trade.

Commonwealth Bank was 3.7 per cent higher at $66.59, Westpac 7.2 per cent ahead at $17.54, NAB up 6.7 per cent at $18.32, and ANZ 5.4 per cent at $17.79.

Bendigo and Adelaide Bank was up 4.4 per cent and the Bank of Queensland 3 per cent. It is shaping up to be the financial sector’s best day in three months.

The Australian sharemarket was ahead 1.5 per cent at noon and earlier rose by as much as 1.6 per cent to a two-week high 5973.7. It is easily leading the Asian sector and on track for its best week in six.

The big miners were also strong, with BHP up 2 per cent and Rio Tinto 1.4 per cent. Biotech CSL, Fortescue Metals, and Wesfarmers were narrowly ahead while supermarkets Woolworths and Coles dragged.

US futures were up 0.5 per cent at noon.

IVF provider Virtus Health is set to pay its postponed 12 cent per share interim dividend on November 30.

The $9.6 million payout comes six months after it was originally to be delivered, when the company adopted caution amid the onset of the COVID-19 pandemic.

Virtus Health CEO Kate Munnings.

Virtus Health CEO Kate Munnings. Credit:Dominic Lorrimer

The virus has hit the fertility services firm hard. Last month it announced net profit for the year to June 30 fell by more than 96 per cent to $946,000, from $29 million in 2019.

However, on Friday it said “the strength of recent trading and operating cash flow in the three months to August 2020 has provided the board confidence to confirm payment of the dividend.”.

While COVID 19 continues to present challenges, business performance and related cash flow generation has led to a $15 million improvement in the group’s net debt position since the end of the financial year.

Net debt as at August 31 was down from $126 million to $111 million. Virtus’ unused and available debt facilities amount to $97 million.

Shares in Virtus were up 1.9 per cent at $3.74 by 11.40am AEST. The firm has shed about 20 per cent of its value in 2020.

There have been four new coronavirus cases recorded in NSW during the latest 24-hour period.

One of the cases is the man in ICU at Campbelltown Hospital announced on Thursday, and the remaining three cases are returned travellers in hotel quarantine.

Read our live and free coronavirus blog here

NSW Health’s Dr Jeremy McAnulty said the source of the man’s infection is still unknown and contact tracing and investigations are continuing.

The 28 days of zero community virus transmission Queensland insists of NSW before reopening the border is likely to be reset again.

Anyone who attended Woolworths at Campbelltown Mall on Thursday September 17 between 1.30pm and 2pm should monitor for symptoms and get tested immediately if they develop, as the man attended while infectious. They do not need to immediately self-isolate.

Meanwhile, a new agriculture permit will allow for workers to travel through NSW and Victoria, as it is foreshadowed the states’ border zone will soon be expanded.

No new cases of COVID-19 were detected in Queensland in the past 24 hours after more than 5000 people were tested.

Premier Annastacia Palaszczuk said five cases remained active across the state.

The big four banks have pushed higher again in the wake of the federal government’s intent to wind back responsible lending laws.

The financial sector was up 3.2 per cent – and the wider ASX 200 up 1.5 per cent – thanks to an early push from Commonwealth Bank, Westpac, NAB, and ANZ.

The local bourse is at its highest in two weeks, fully repairing the four-day slide that wiped nearly 3 per cent off its market capitalisation from Thursday last week to Tuesday.

The ASX 200 has started strongly as a flagged easing of lending restrictions fuels a banking-led rise.

The benchmark index rose by as much as 1.1 per cent at Friday’s open to 5942.2, its highest in more than a week, thanks to the heavyweight financials. It soon ticked up to a 1.3 per cent gain.

The banks were higher after Treasurer Josh Frydenberg unveiled plans to overhaul the laws governing mortgages, personal loans, credit cards and payday lending to streamline decisions on whether customers can afford loans.

After 15 minutes Commonwealth Bank was up 2.3 per cent at $65.74, NAB jumped 4.9 per cent to $18.04, and ANZ rose 4.3 per cent to $17.60.

Westpac – which has been raised to outperform at CLSA – climbed 6.1 per cent to $17.38.

Regional lender Bendigo and Adelaide Bank was up 2.6 per cent to $6.26 and Bank of Queensland rose 3.3 per cent to $6.24. Macquarie Group rose 0.4 per cent to $122.30.

The big miners were also ahead, with BHP rising 1.7 per cent to $37.53, Rio Tinto 1.8 per cent to $98.93, and Fortescue Metals 1 per cent to $16.11. Gold miner Newcrest added 1.4 per cent to $31.11.

Biotech CSL and retail conglomerate Wesfarmers were flat.

Shares in multinational drug maker AstraZeneca declined overnight after chief executive Pascal Soriot confirmed the company is still waiting on the US Food and Drug Administration to give it the green light to resume its coronavirus vaccine trial.

Mr Soriot told a World Economic Forum event on Thursday evening that AstraZeneca was the sponsor for clinical trial research being undertaken for the Oxford University vaccine in the US.

AstraZeneca halted its trial to investigate the unexplained illness of a person involved.

AstraZeneca halted its trial to investigate the unexplained illness of a person involved.Credit:AP

Global phase 3 trials of the vaccine were paused earlier this month after a participant had an adverse reaction, but have since restarted in the UK, Brazil and South Africa.

“In the US, we are waiting to hear from the FDA,” Mr Soriot said. He assured global citizens they should not be sceptical about the safety of COVID-19 vaccines because any product that comes to market will be reviewed by a number of global regulators.

“At the end of the day you have got to trust that the experts are doing a good job,” he said.

AstraZeneca shares declined by 3 per cent on the London stock exchange to 8.559 British pence, and its listed shares on the New York stock exchange dropped 2.7 per cent to $US54.17.

The federal government has revealed its biggest deficit on record $85.3 billion or 4.3 per cent of GDP for 2019-20 following massive government spending to help struggling households and businesses get through the coronavirus pandemic.

Last financial year’s budget deficit has now surpassed the previous record of $54.5 billion in 2009-10 following stimulus measures from the Rudd government to help Australia weather through the global financial crisis. In 2008-09 the deficit reached $27 billion.

Treasurer Josh Frydenberg.

Treasurer Josh Frydenberg.Credit:Alex Ellinghausen

Treasurer Josh Frydenberg said on Friday morning that the Australian economy had performed well in the lead-up to the crisis, with unemployment down to 5.1 per cent in February.

“Notwithstanding this strength coming into the crisis, our economy has been hit hard,” Mr Frydenberg said.

“The underlying cash balance was a deficit of $85.3 billion, or 4.3 per cent of GDP, compared to the forecast surplus of $5 billion, or 0.3 per cent of GDP at [the mid-year update],” he said.

“This is a half a billion improvement from what was estimated in terms of the deficit, but a $93 billion deterioration forecast [from] the end of the last year.”

Net debt increased to $491 billion and gross debt jumped to $684.3 billion.

Labor treasury spokesman Jim Chalmers said on Friday morning the government had promised a surplus but delivered six deficits before the pandemic hit, with debt at a record high.

“We have been consistent all along and acknowledged the impact of the virus on the budget,” Dr Chalmers said.

“We said the highest priority is supporting people and their jobs but every dollar is a borrowed dollar and we need maximum bang for buck and measure the effectiveness and see what it means for people and their employment,” he said.

“We are heading towards a trillion dollars in debt and unemployment that is unacceptably high and for a long time.”

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