Blame the banks. Just as the Big Four banks have driven the sharemarket in recent years, as well as the housing boom (in Sydney and Melbourne, at least in the past 18 months), now they are sinking the market. ANZ last week announced a $3 billion capital raising and a weak trading update. As a result the market shed $37 billion in value on Friday, the biggest fall for three years.  ANZ lost 7.8% for the week, Westpac, 7.2%, NAB (which has already raised $5.3 billion) dropped 7.2%. The biggest bank, the Commonwealth, shed 7.1% for the week and could go lower after media reports this morning that the CBA is looking at a capital raising of around $5 billion (but with a good deal for small shareholders, which will soften the blow). We’ll know Wednesday. CBA is also reportedly cutting back on new home and land lending as well, which will damage the housing boom (especially the more valuable construction segment). The bank will announce a 5% rise in earnings to a record $9.1 billion on Wednesday as well. A generous issue to small shareholders by the CBA could stop the market rot, set off by the ham-fisted ANZ, which first said three months ago it didn’t need to raise money, then shocked with the announcement last week. — Glenn Dyer

Which China? Which China will we see on display this week — weakening China with a dodgy sharemarket, wobbly China with the sagging economy, or rate cut China struggling with an achy breaky pace of growth? The first is dominated by the gyrations in the country’s stock exchanges, the latter two by the flow of economic data, which we got at the weekend and will get more this week. Over the weekend figures were released showing moderate consumer inflation (up 1.6%, the government target is 3%), but we also saw an intensification of the deflation gripping manufacturing to an annual rate of 5.4% (from 4.8% in June). Exports dropped a surprisingly large 8.3% in June (against a 2.8% rise in June). Imports tumbled 8.1% after the 6% drop in June. But the drop in imports is not as bad as some have painted it. Imports of key commodities hit new highs in some cases as Chinese buyers take advantage of falling prices in the month. For example, China’s crude oil imports rose to a record monthly figure of 30.71 million tonnes, or 7.23 million barrels a day in July, up 4.1% from June. — Glenn Dyer

Rate rise coming (not here). The US is heading for an almost certain rate rise in September after the July jobs data showed no sign of weakness in the still expanding labour market. Some 215,000 new jobs were created in July, and the jobless rate remained steady at 5.3%, while the number of people looking for work and unemployed dipped as well. And speaking of jobs, the Reserve Bank hauled back on its jobs forecasts in Friday’s Statement of Monetary Policy. The central bank expects the jobless rate is set to remain little changed for the next 18 months, instead of drifting higher as forecast in the May monetary policy statement and other statements. It also cut its forecasts for GDP growth in 2016. It now expects the economy to grow by 2.5% to 3.5%, compared with a May forecast of 2.75% to 3.25%. The RBA said that as the economy has slowed as the mining boom has faded, net immigration has also been slower than expected, as skilled workers return to countries like New Zealand. The RBA assumes the reduced level of net immigration will persist for two years, in part because the Australian jobs market will remain weaker for longer — but not worsen as previously indicated. Unemployment has been between 6.0% and 6.3% for months, undermining the RBA’s expectations that it would move closer to 6.5%. The unemployment rate will now sit around 6% out into 2017 and through the next federal election campaign. Interestingly, despite this, the RBA is also seeing improvement in the overall economy. — Glenn Dyer

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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