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Bank and energy stocks lifted the bourse higher on Monday though volume was generally light as New South Wales, Queensland and South Australia enjoyed a public holiday.
The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each rose 0.7 per cent to 5478.5 points and 5564.8 points respectively.
Commonwealth Bank did most of the heavy lifting on the ASX, up 1.5 per cent, though blue chips across the board traded mostly in the black.
Worries over Deutsche Bank's capacity to pay the enormous $US14 billion fine suggested by the US Department of Justice have abated somewhat following a report the figure may be closer to one third of that sum, though analysts are still wary.
"Concern about Deutsche Bank is far from over," Nicholas Teo, a strategist at KGI Fraser Securities. "Systemic risk is a real possibility with the derivatives exposure that plagues Deutsche."
Westpac was up 1.7 per cent, ANZ was up 1.1 per cent and National Australia Bank closed 0.6 per cent higher. Oil is flirting with $US50 a barrel and provided support for the energy sector which outperformed on Monday.
Australia's biggest oil producer Woodside Petroleum was up 0.8 per cent as Brent crude oil was fetching $US49.96 a barrel in late afternoon.
Resources giant BHP Billiton was up 1.7 per cent and rival Rio Tinto was trading 0.6 per cent higher. BHP spinoff South32 enjoyed a solid day, up 2.5 per cent while iron ore miner Fortescue Metals was down 1.2 per cent.
Here's how the market settled on Monday at the close:
It was a strong day for Australian Agricultural Co which led the leaders with a gain of more than 9 per cent.
Orocobre was the biggest laggard down more than 5 per cent.
The S&P/ASX 200 Index has finished 42.6 points higher on Monday, the first day of the new quarter, to 5478.5 points, lifted by financials and materials stocks.
The sharemarket has now risen in three of the past four sessions and is ahead 3.4 per cent calendar year to date.
More to come.
The run of wet weather has been a blessing for coal prices, but it could become a problem and delay the planting of some crops over the next few weeks.
"While the growing season for wheat and allied crops has had an excellent start, you can have too much of a good thing as the crop progresses," says the research team at NAB.
Phin Ziebell, NAB's Australian agriculture commodities analyst, forecasts this year's wheat crop nationally will be up 13.9 per cent. Sugar and cotton production will also rise, although there are question marks around the timing of cotton planting in the Riverina. On the flipside, the re-stocking of national herds will mean lower red meat production.
It was a big weekend for the Chinese renminbi with its official admission into the IMF's special drawing rights basket taking effect.
But according to new analysis from ANZ, any accusations that China is a currency manipulator are without grounds.
"China does not meet the US Treasury's current criteria for being labelled a currency manipulator," the report by Khoon Goh, head of Asia research, says. "If [Donald] Trump wins the US presidential election and wants to label China as one, the current criteria would need to be changed to focus solely on the large bilateral goods surplus between the two countries."
Thailand and Taiwan both fly closer to the wind under the criteria, which requires:
Having a significant bilateral trade surplus with the US, with the threshold at $US20 billion;
Running a material current account surplus, with the threshold set at in excess of 3 per cent of GDP (China's current account surplus has fallen below the 3 per cent threshold);
Engaged in persistent, one-sided intervention, assessed as repeated net purchases of foreign currency totalling in excess of 2 per cent of GDP over a period of 12 months.
Ahead of the Reserve Bank of Australia's October meeting tomorrow, Jessica Sier writes that the central bank has a familiar problem:
The strength of the Australian dollar is the one element that may prompt the Reserve Bank of Australia to cut rates soon, although most economists say there will be no more rate cuts this year.
The central bank meets on Tuesday and given growth is strong, commodity prices have risen and the drag from the mining investment decline is fading, the market is pricing in close to a zero chance of a rate cut. Economists agree.
The latest Bloomberg survey shows only eight of 24 analysts expect a cut to 1.25 per cent in November.
HSBC chief economist Paul Bloxham argues that rather than asking when the next cut will be, the case for no further cuts is strengthening.
"The key challenge to this view is that the lift in commodity prices and local growth could present an upside risk to the Australian dollar," said Mr Bloxham. "And if the Aussie dollar were to lift, it could weigh on export growth and inflation. But our central case sees the RBA on hold in the coming quarters."
Large employers in South Australia are faced with another week of power blackouts following last week's storm, with power restored to only parts of the state, writes Brian Robins.
Arrium, BHP Billiton's Olympic Dam mine, and Oz Minerals' mine at Prominent Hill are all experiencing extensive disruptions. Some have access to limited back-up power generation, although in all cases, output is being hampered.
Arrium is believed to have sufficient energy to keep its blast furnace alight, while operations at Olympic Dam remain suspended. The mine camp is receiving small amounts of power but it is insufficient to restart operations.
ElectraNet, which operates the high-voltage power network has advised that it may have one of the three damaged circuits back up and running late next weekend, with a second link to follow a few days later.
Cadence Capital's 2016 annual report shows chairman Karl Siegling's biggest long and short positions as of June 30. Things may have changed since then but here is the snapshot:
His top 3 shorts: Woodside Petroleum, MYOB Group, Rio Tinto
His top 3 longs: Macquarie Group, Melbourne IT, Asciano
​Cadence Capital's long-term track record of outperformance is a stunning 9.31 per cent over the All Ordinaries index since inception more than 10 years ago. But over 2015-16, the fund underperformed by 14.2 per cent.
"The volatility in share prices in this calendar year has been high, but over time trends re-emerge, and as always, present new investment opportunities. In July and August we have seen the first tentative signs of recovery in markets and uncertainty has eased," the fund manager said.
For those with an interest in what the big end of town is buying (and selling) here are some substantial shareholder notices that have got our attention:
Japara Healthcare: Perpetual bought 5.37 per cent on Sept 28
Baby Bunting Group: AustralianSuper bought 5.57 per cent on Sept 29
APN Outdoor: Ellerston Capital increased its stake to 6.35 per cent on Sept 30
Southern Cross Media: Vinva bought 5.06 per cent on Sept 28
iSelect: Perpetual reduced its stake to 7.34 per cent on Sept 28
Bradken: Paradice increased its stake to 7.77 per cent on Sept 27
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Fund manager Geoff Wilson had these comments on the Australian equity market outlook in WAM Capital's annual report which came out on Friday.
"We are cautious about the direction of the equity market in the 2017 financial year. The recent reporting season provided mixed results, pointing to the negative effects of the extended federal election and difficult trading conditions.
Looking forward, many companies provided guarded outlook statements. Record low global interest rates have driven asset values to unsustainably high levels. We are wary of the impact a change in the current 'easy money' policy will have on equity valuations.
Against these conditions, the Australian economy is beginning to show some signs of strength, with gross domestic product numbers released in September pointing to year-on-year growth rate of 3.3 per cent, the strongest growth rate in four years. Despite the mixed outlook, we continue to find investment opportunities and our current cash weightings ensure we are well positioned to seize opportunities as and when they arise."
The latest China PMI buzz is that big companies are doing all the heavy lifting.
ANZ economists say even though the official PMI stayed at 50.4 in September, large enterprises' PMI rose 0.8 points to 52.6, offsetting the worsening activity trends for small- and medium-sized firms.
"The PMI figures indicate that September's economic statistics will be much more resilient than we previously expected. Industrial production and retail sales this month will likely bias towards the upside. Downside risk to growth will start to subside. The data flows support our recent upward revision of 2016 GDP to 6.7 per cent."
China still needs to address capacity reduction, and undertake structural reform. "As the producer price index (PPI) likely turns positive after four years of contraction, the deflationary threat has waned," says ANZ.
It's a four-part show that has been billed as "part drama/part investigation" and its set to enthral the political and financial world for most of this week.
The big four bank chiefs will each face three hours of questioning from the 10-person House of Representatives Economics committee on consecutive days.
It promises drama, conflict, humiliation and tension as our nation's elected officials engage in one of Australia's favourite pastimes – bank bashing.
Commonwealth Bank chief Ian Narev is first to appear on Tuesday and has been billed as the most exciting call-up given the Storm Financial and CommInsure scandals have been amongst the highest profile issues in banking.
Narev is expected to argue that the bank has largely resolved the customer issues and may take the opportunity to defend the banking sector but it remains to be seen whether his tone is one more sorrow than defiance.
The chief executives that are likely to face the least pressure are Westpac's Brian Hartzer and National Australia Bank's Andrew Thorburn. Both are viewed as non-confrontational and have made conciliatory comments about the industry in the lead up the hearing.
About a tenth of the world's nickel supply is at risk after the Philippines widened its crackdown on miners, raising the chances of prices rallying by another 25 per cent through 2017, according to UBS, which had already billed the metal as one of its favoured commodities.
The nickel market is reeling after the Philippine government threatened to close another 14 mines last week, pending responses to an environmental audit. Of the 41 operations that were reviewed - the majority of them nickel producing - about three-quarters have either been halted or told they need to come up to scratch.
That puts 55 per cent of Philippine nickel output, or 11 per cent of global supply, at risk of exiting the market, according to UBS. Shutdowns raise the chances of nickel reaching $US6 a pound, or $US13,228 a tonne, by the end of next year, analyst Daniel Morgan said.
"A supply cut of about 10 per cent is a big cut in any commodity market," he said. "In the short term there is enough metal out there as a buffer for the next few months, so are the stainless steel customers anxious? I would say not yet, but they will be in 2017. Our base case is heading towards $US6 by the end of 2017 but there is every potential that a rally could go further."
Nickel is 20 per cent higher this year at $US10,575 a tonne, with the bulk of the gains coming since June, when incoming Philippine President Rodrigo Duterte and his pick as environment secretary, Gina Lopez, vowed to crack down on a mining industry they say is despoiling the land and threatening the livelihoods of the poor.
UBS named nickel as one of its most-preferred commodities in August, before the extent of the Philippine crackdown had become apparent. The Southeast Asian nation supplies nearly all of the ore used in China's stainless steel industry, and Citi has also warned that the "unexpectedly stringent" audit could materially tighten supplies.
Short positions in the major banks have increased over the past month, with the exception being CBA, Deutsche says in a note to clients.
But overall the shorts as a percentage of shares issued remain relatively low.
"Excluding CBA, major bank short positions increased by about 39 basis points to 1.6 per cent on average," Deutsche says. "This reverses the downward trend we had seen since May."
ANZ and Westpac have the highest level of short positions at 1.9 per cent, according to the data analysed by Deutsche, while NAB is the lowest (1.0 per cent) and CBA is at 1.5 per cent.
The regionals are significantly higher, with Bendigo at 7.8 per cent and Bank of Queensland at 3.3 per cent.
Looking at the short interest ratio (days to cover), the majors are at 5.9 days, lower than the ASX200 index at 6.6 days, the bank adds.
OZ Minerals may miss its full year gold production guidance because of an outage caused by the South Australian power blackouts, but the miner says it should still achieve its copper targets.
Production of copper concentrate at OZ's only operating mine, Prominent Hill, was forced to a halt on September 28 when the power connection was severed by an intense storm. The company said today that power should be "progressively restored" within seven to ten days.
Mining in the open pit has continued throughout the crisis, and some limited operations are underway in the underground part of Prominent Hill.
But processing facilities have been halted since the blackouts meaning production of copper concentrate has also been halted.
Shares are down 0.1 per cent at $6.08.
Is US presidential election politics to blame for the market panic about Deutsche Bank? the AFR's US correspondent John Kehoe asks:
It is a legitimate question being asked in Washington and one that deserves scrutiny.
Deutsche's woes are multifaceted. However, a major cause of its recent share price plunge was a leak to media that the Obama administration's Department of Justice was lining up the German bank for a whopping $US14 billion fine for selling toxic mortgage securities in the lead up to the 2008 financial crisis.
If the anonymous innuendo came from inside the Democratic administration, as it appears it might have, heads should roll.
It would be the height of irresponsibility to let slip confidential negotiations about such a fragile financial institution, especially given it now seems the final settlement will be closer to the $US6.1 billion Deutsche has already set aside for legal disputes.
Political bank-bashing might be at play. Democratic senators Bernie Sanders and Elizabeth Warren, for example, are pressing President Obama and his hopeful successor, Hillary Clinton, to go after reckless banks.
Coincidentally, Deutsche is Donald Trump's main bank, though we won't take the conspiracy theory that far.
Financial regulators are normally very careful about casting negativity over a specific financial institution, because the mere sniff of collapse can become self-fulfilling as depositors and other creditors yank their money out.
Of course, it is possible the leak came from Deutsche's side to manage market expectations. But given how fragile the German lender is, it would have been breathtakingly stupid for an insider to do it.
Suspicions intensified that politics is at play after a Financial Times report that US prosecutors are aiming for a joint multibillion-dollar settlement with Europe's Barclays, Credit Suisse and Deutsche to have maximum impact before the election.
German discount supermarket Aldi may be in breach of disclosure requirements, an expert says.
Jeffrey Knapp, a lecturer in accounting at the UNSW, said Aldi's failure to do consolidated accounts was an important regulatory issue that was being overlooked.
Consolidated accounts show assets, liabilities, revenues and expenses line by line. By contrast, Aldi's accounts show its Australian business as just a one-line investment asset with no detail on sales, gross profit or profit.
"They [Aldi] say in their accounting policy that they comply with all the recognition and measurement requirements in accounting standards," Knapp said. "But it doesn't look like they're doing what they say they've done."
While Aldi Foods gives the Australian Taxation Office consolidated financial information, there is a different story in the accounts lodged with ASIC. Aldi Foods' audited accounts, signed off by KPMG, are not consolidated.
Aldi Foods' accounts, lodged with ASIC for the 2015 calendar year, state it has a 20 per cent interest in the net profit of the limited partnership and describe Aldi Foods as a "small proprietary company that is controlled by a foreign company".
Here's more
Canberra is the housing market to watch after posting strong a monthly price rise and an annual growth much higher than the previous year, Corelogic Hedonic Home Value Index shows.
Canberra house prices rose 2.4 per cent for the month beating Melbourne at 2.3 per cent and Sydney at 0.8 per cent. Canberra has also posted the same kind of strong year-on-year house price growth as Melbourne and Sydney of 9 per cent.
This time last year Canberra posted only 0.6 per cent year on year growth, while both Sydney and Melbourne were steaming ahead at 16.7 per cent and 14.2 per cent.
Both Sydney and Melbourne are more subdued this year racking up annual rises of 10.2 per cent and 9 per cent respectively. Canberra has been playing catchup with the return of public sector jobs, increased post-election confidence and low interest rates.
Nationally, annual growth in prices ticked up to 7.1 per cent in September, from 7 per cent in August, though that remained a long way from last year's peak atop 11 per cent.
After its last easing in August, the RBA played down risks of a bubble in the housing market and specifically noted that changes to the methodology of CoreLogic's data had overstated recent price gains.
Despite the strong numbers, Corelogic says the rate of growth in house prices has slowed and will continue to do so, particularly for Sydney and Melbourne.
...Perth dwelling prices back to 2007 levels, Darwin dwelling prices back to 2009 levels. Very divergent property markets in Aust!
— Shane Oliver (@ShaneOliverAMP) October 2, 2016
"Since the end of 2008, Sydney dwelling values increased by almost 95 per cent and Melbourne dwelling values are up 80 per cent. Canberra is the only other housing market where the cumulative capital gain has been greater than 20 per cent post GFC," said CoreLogic head of research Asia Pacific Tim Lawless.
"While we've seen values remain relatively strong, in contrast, rental yields have been in the doldrums due to the fact that residential property values are rising at a faster rate than weekly rents."
The typical gross yield on a Sydney and Melbourne house is now 2.8 per cent, while the gross yield profile for a Sydney unit is the lowest of any capital city, averaging 3.9 per cent, according to CoreLogic.
Stocks have opened higher, led up by the big banks following reports that Deutsche Bank is close to a settlement with US authorities over the sale of toxic mortgage bonds.
The ASX has risen 0.7 per cent to 5473.6 and the All Ords is up 0.65 per cent at 5561.8.
Deutsche's share slide amid worries over its abilities to pay up to $US14 billion in fines have weighed on global sentiment, but AFP reported that the bank is likely to pay less than half of that amount.
Banks are leading the market higher, with CBA up 1.2 per cent, but most other blue chips are in the black too.
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