By: Jason Shao
There were many revelations last week in the financial sector, as the Banking Royal Commission uncovered several less-than-ethical procedures. Fee-for-no-service was a key theme, as financial advisors across the big four banks as well as AMP charged fees to clients who were receiving either no advice or “dud advice”. On one occasion, a Melbourne nurse said that Westpac’s advice led to her family losing her home. On several other instances, banks were alleged to have charged fees even in cases where clients had died. AMP’s CEO Craig Meller has resigned over the controversies. All eyes are on this sector as the Banking Royal Commission continues hearings.
Blue Sky, one of Australia’s largest alternative fund managers, sees its managing director Robert Shand quit amidst allegations of inflated asset prices in its management, amongst other accusations. These accusations have been led by Glaucus, a hedge fund in the US. Shares in Blue Sky have already tumbled 70% and may fall further as Blue Sky looks for a new boss.
Gold continues to do well amidst geopolitical tensions, as investors look for safe assets. Gold will be watched closely and could see further upside if the trend continues. Oil is reaching higher highs, as it reaches close to $70 USD/barrel. Strong Asian demand has driven prices up, and we could see further upside in the coming week.
The Australian dollar continues to lose ground to the US dollar as US bond yields continue to weigh in. The increases in the US bond yields are a sentiment to potential rate hikes by the Fed. There is generally a positive correlation between cash rates and currency value, and as the Fed looks to hike rates over the next year, the US dollar continues its strength and has had its best week last week amid inflation concerns.
Earnings season in the US will be watched closely upon by the Fed. Strong earnings could signal further inflation and increase the likelihood of more frequent rate hikes. US 10-year Treasuries have hit their highest level since 2014, close to 3%. A rise in rates could be devastating to asset prices everywhere, as valuations on assets fall due to rising bond yields. We’ll see if yields can be held at 3% this week, or shrink.