RBA and APRA set to “stress test” major banks and insurers for climate change vulnerability: Aus shares to open lower

Market Reports

by Katrina Bullock

The Australian share market looks set to open lower following mixed headwinds from overseas markets. The United States’ 3 main benchmarks hit record highs overnight on the back of comments from the US Treasury Secretary that a US-China trade deal would be signed in early January. Wall Street has not experienced much instability as a result of President Donald Trump’s impeachment by the House Democrats, likely because investors still expect the Republican-controlled Senate to acquit President Trump. The Australian Prudential Regulation Authority and the Reserve Bank of Australia are expected to adopt a series of “stress tests” to measure the preparedness of Aussie banks and insurers, to deal with changes in asset prices brought on by global warming or policies to limit emissions. The climate models to be used to analyse the financial strength of companies are being developed by an international group of regulators, chaired by Bank of England governor Mark Carney. This follows Mr Carney’s comments on Wednesday that Britain's top banks and insurers will be subject to similar stress tests.

Markets
Wall Street closed higher yesterday: The Dow Jones Industrial Average closed 0.5 per cent higher at 28,377, the S&P 500 gained 0.5 per cent to 3205 and the NASDAQ climbed 0.7 per cent to 8887.
European markets closed mixed: London’s FTSE added 0.4 per cent, Paris gained 0.2 per cent and Frankfurt dropped 0.1 per cent.
Asian markets closed mixed: Tokyo’s Nikkei fell 0.3 per cent, Hong Kong’s Hang Seng also dipped 0.3 per cent and China’s Shanghai Composite closed flat.
Taking all of this into equation, the SPI futures are pointing to a 0.3 per cent fall.
Yesterday, the Australian share market closed 18 points or 0.3 per cent lower at 6833.

Company News
After the market close yesterday, Lendlease Group (ASX:LLC) confirmed that it has sold its troubled engineering business to Acciona Infrastructure Asia Pacific. The Spanish infrastructure conglomerate snapped up the business for a purchase price of $180 million. The sale is expected to complete in the first half of the 2020 calendar year and is subject to client consent and regulatory approvals. The sale excludes the NorthConnex and Kingsford Smith Drive projects, which are approximately 90 per cent complete. It also excludes the Melbourne Metro Project, which is still on the negotiating table. In relation to the sale Group CEO and Managing Director, Steve Mccann, says that “it enables the Group to focus on its core competitive advantages”, with the company’s “core strategy” now “focused on urbanisation in gateway cities”. Shares in Lendlease Group (ASX:LLC) closed 0.2 per cent higher at $18.88 yesterday.

Currencies
One Australian Dollar at 8:35 AM was buying 68.86 US cents, 52.95 Pence Sterling, 75.29 Yen and 61.93 Euro cents.

Commodities 
Iron Ore has gained 0.6 per cent to US$93.77.
Iron Ore futures suggest a 0.3 per cent fall.
Gold has added $4.20 to US$1483 an ounce.
Silver has gained $0.07 to US$17.12 an ounce.
Oil has added $0.29 to US$61.22 a barrel.