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The all-important Australian budget was released last night in the first surplus for 15 years at a figure of $4.2bn surplus for 2022-2023 and massively reduced budget deficits in the forecasted years to come, with the key winners being aged care workers through receiving a pay increase of 15%, women through cheaper childcare and funding toward boosting the number of women in apprenticeships, and all Aussies through a cost of living package worth $14.6bn. The surplus budget has been driven by high commodity prices, a strong jobs market and a boost in net migration.
The big banks have been caught up in a regional-banking fear sell-off over recent weeks and investors have responded negatively to some of the respective quarterly results updates, however for the likes of Westpac the latest results included a 22% jump in profit and the declaration of a 70-cps dividend. Investors have been hawk eyeing the big-banks provisions for doubtful debts which have risen and any declines in net interest margins which for NAB appear to have peaked, with NIM down at 1.77% and Bad and doubtful debts up to $393m, well above consensus expectations. CBA released quarterly results yesterday and despite profits jumping 10% on the PCP to $2.6bn, investors sold out as net interest margin came in 2% lower during the quarter and provisions rose to $5.7bn.
Over in the US today stocks closed lower as investors fear turbulence on the regional banking front, in addition to preparing for key inflation data readings out later this week in the form of US CPI and PPI readings. Investors are also keeping a close eye on the US debt ceiling progression. The Dow Jones fell 0.17% the S&P500 lost 0.46% and the tech-heavy Nasdaq fell 0.63% on Tuesday.
Investors in the US will be keeping a close eye on debates in the region over the coming weeks around the US debt ceiling, with US Treasury Secretary Janet Yellen saying failure to raise the debt ceiling would result in an economic catastrophe. “That is something that could produce financial chaos, it would drastically reduce the amount of spending and would mean that Social Security recipients and veterans and people counting on money from the government that they’re owed, contractors, we just would not have enough money to pay the bills,” Yellen said to CNBC. The comments came as a political stalemate over raising the debt limit is forcing the Treasury Department dangerously close to the worst-case-scenario of the US defaulting on debt.
Over in Europe, markets closed lower as investors look ahead to US inflation data out this week, in addition to lower oil prices and weak Chinese trade data weighing on markets yesterday. Germany’s DAX closed flat, the French CAC fell 0.59% and, in the UK, the FTSE100 fell 0.18%.
The local index closed 0.17% lower yesterday, weighed down by a sell-off in real estate stocks possibly due to a number of reasons with investors maybe taking some profits from the rally in the sector last week, or the investor confidence in the sector sliding amid rising interest rates and predictions for an increasing number of defaults on mortgages to come.
What to watch today: