Surprisingly, the consumer sentiments witnessed a rise of 2.8% to 104.3 Index Points in the month of November 2018. This number has shot up from 101.5 in the month of October 2018. This improvement has truly surprised the market players primarily because the Australian economy has been going through a lot of hurdles. First of all, the housing prices are witnessing a decline. Secondly, the banking sector is facing significant pressures from the regulators because of the misconduct concerns. As a result of this, the banks have lost the consumers’ confidence and trust. Westpac Banking Corporation (ASX: WBC) has stated in its FY 2018 results they have incurred significant remediation expenses. The banking sector in Australia is truly facing substantial headwinds.
Moreover, the US-China trade tensions continue to impact the global business and consumer confidence. Not so long ago, the report of International Monetary Fund or IMF stated that the impacts of the trade battle might also be felt upon the Australian economy. However, if any settlement is reached between the United States and China, it might ease the worries in the consumer as well as business space. Moreover, the global markets have also witnessed the downturn which further dents the business confidence. Amidst all these negative factors, an improvement in the consumer sentiments to 104.3 Index Points in November 2018 has indeed surprised the market players. The economists have also reflected their positive views over the number. The US economy is strong and, thus, the Federal Reserve (the central bank of the US) has decided to raise the rates which have dashed the hopes of the apex bank’s dovish stance. The market participants are expecting that the Fed is likely to increase the interest rates in the month of December 2018 even after the market witnessed substantial downturn and the rising concerns for the slowdown in the global economy.
However, while the Federal Reserve is hawkish, the market participants believe that the Australian central bank would not change the cash rate moving forward. Also, according to them, the rise in consumer confidence is well-supported by the lower interest rates as well as the expectations that these rates would sustain moving forward. However, the spending intentions are still weaker. In 2018, 2019 and 2020, the Westpac Banking Corporation is of the view that the Reserve Bank of Australia or RBA would be keeping the cash rate on hold.
One of the big four banks named, National Australia Bank Limited (ASX: NAB), stated view that the business conditions are above average. According to the key personnel of NAB, the positive momentum in the business sector reflects the sector’s robust health along with strong economic growth.
On November 14, 2018, the stock price of NAB witnessed the negative momentum as the stock settled at A$23.930 per share reflecting an intraday decline of A$0.570 per share or 2.327%. The stock price of NAB is trading towards the lower range, and it has an annual dividend yield of 8.08%. The bank has a market cap of $66.99 billion.
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