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Mortgage lending in Australia has fallen for the fourth month in a row, according to the latest data from the Australian Bureau of Statistics (ABS).
Key points:
- The ASX 200 has lost more than 6 per cent since the year began
- Overnight, all three major Wall Street indices closed down
- The pan-European STOXX 600 index rose 0.6 per cent
The value of new loan commitments for housing slumped 8.2 per cent, to $25.1 billion, in September.
Owner-occupier loans plunged 9.3 per cent, while investor loans fell 6 per cent during the period.
Home loan growth has seen a slowdown since June, after the Reserve Bank began rate hikes in May.
Senior economist Maree Kilroy from BIS Oxford Economics said the fall in owner-occupier loans was "the steepest monthly decline on record", and was an indication of further falls ahead for house prices.
"We, ultimately, expect a nationwide, all-dwelling median price peak-to-trough fall of 11.5 per cent," she noted.
Katherine Keenan from the ABS said that, although housing lending had fallen for four consecutive months, the value of loan commitments in September remained well above pre-pandemic levels.
"Owner-occupier loans in September were 23 per cent higher than in February 2020, while investor loans were 60 per cent higher," she said in a statement.
Meanwhile, the latest ABS Building Approvals release shows the number of new dwellings green-lighted for construction eased in September, falling 5.8 per cent, month-on-month, to 16,455.
"Approvals are expected to hold relatively flat to the end of 2022, with support for houses coming from the flow-through of a record volume of greenfield land being sold in 2021," Ms Kilroy said.
"Beyond the sizeable backlog of work already committed, the outlook darkens medium term.
"It has become increasingly difficult for new projects to gain traction, which will drag on approval volumes in 2023."
Rising interest rates have put the brakes on home loan growth and housing finance approvals.
On Tuesday, the RBA raised its official cash rate by a quarter of a percentage point to 2.85 per cent to try to curb inflation, which it now expects to peak at 8 per cent by the end of the year.
ASX edges up
Australian shares rose on Wednesday, led by the gains in the heavyweight mining and energy sectors on a rebound in commodity prices, a day after the country's central bank delivered a modest interest rate hike.
The ASX 200 closed up 10 points, or 0.1 per cent, to 6,987.
By 4:31pm AEDT, the Australian dollar was up, at 64.20 US cents.
Miners, energy and utility stocks were offsetting losses from other sectors.
Miners rose 1.4 per cent after iron ore prices rebounded on Tuesday.
Coronado Global Resources (+8.8 per cent), Lake Resources (+5.2 per cent) and BHP (+2.1 per cent) were among the top movers.
Rio Tinto (+2.4 per cent) said two key investors in Canada's Turquoise Hill Resources — which it is trying to acquire — have agreed to withhold their votes at a meeting to decide on the $US3.3 billion ($5.16 billion) offer.
Energy stocks also rose 1.1 per cent, hitting their highest since January 2020, after oil prices rose on hopes of China reopening from its strict COVID-19 lockdowns.
Woodside Energy rose 1.2 per cent, while Santos gained 0.8 per cent.
Financial stocks were up about 0.1 per cent in choppy trade, with three of the big four banks recouping their early losses.
Local biotech major CSL announced a deal with Arctus Therapeutics to gain access to the US firm's mRNA vaccine technology. The stock traded down 0.2 per cent.
Domino's Pizza (-5.3 per cent), Amcor (-4.3 per cent) and Cromwell Properties (-4.8 per cent) were among the worst performers.
US stock indexes fall
Overnight, US stocks closed lower for a second-straight session after data indicating the country's labour market remained on solid ground dimmed hopes that its Federal Reserve might have enough reason to begin decreasing the size of its interest rate hikes.
A survey showed US job openings unexpectedly rose in September, suggesting that demand for labour has remained strong, even as the central bank has embarked on a path of aggressive interest rate hikes in an effort to bring down stubbornly high inflation.
Investors have been paying close attention to labour market data for any signs of weakening in the job market, as decreasing wage pressures and easing demand would help reduce inflation, giving the Fed the ammunition it needs to begin decelerating with a 50-basis-point rate hike in December.
Growing expectations that the central bank may have enough justification to begin slowing in December — partly due to data pointing to a weakening economy and a corporate earnings season that has been better than expected — helped stocks rally in October, with the Dow Jones index notching its biggest monthly percentage gain since 1976.
The sharp focus on labour market data overshadowed another report that showed US manufacturing activity grew at its slowest pace in nearly two and a half years in October, as rising interest rates cooled demand for goods and pricing pressures on manufacturers lessened.
"That is the concern for the market … We know the Fed wants to slow down the labour market. They want to slow down hiring so demand drops in the economy, which will help inflation," said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
"From an employment standpoint, things look really robust though, and that is putting some pressure on stocks."
BoE to raise rates
Although last week's European Central Bank (ECB) meeting was perceived by markets as containing dovish signals, the bank's president, Christine Lagarde, said in an interview on Tuesday the central bank must keep raising rates to fight off inflation, even if the probability of a eurozone recession had increased.
The Bank of England (BoE) is also meeting this week and is expected to deliver a 75-basis-points increase as well. Traders then expect the BoE to slow down and raise rates by 50 basis points in December.
In US equity markets, the Dow Jones Industrial Average fell 79.75 points, or 0.24 per cent, to 32,653.2, the S&P 500 lost 15.88 points, or 0.41 per cent, to 3,856.1, and the Nasdaq Composite dropped 97.30 points, or 0.89 per cent, to 10,890.85.
European shares gained on Tuesday, starting November on an upbeat note amid growing hopes that the US Federal Reserve would slow down the pace of its interest rate hikes.
The pan-European STOXX 600 index rose 0.6 per cent, to hit a near seven-week closing high, with miners and retailers leading the gains.
In commodities, oil recouped losses from the previous session on optimism that China, the world's second-largest oil consumer, could reopen from its strict COVID-19 restrictions.
By 4:41pm AEDT, Brent crude oil was up, trading at $US95.77 a barrel.
ABC/Reuters