Commonwealth Bank shares rise as profits increase and potential interest rate cuts loom

ABC NEWS (Australia)

In finance, the Commonwealth Bank shares rose today after the bank reported higher profits and hinted at further gains if interest rates are cut. Alan Kohler has the details.

Transcript

00:00Commonwealth Bank is the most expensive major bank in the world.

00:06After an incredible 18-month surge, its share price is 26 times profit, which is unheard

00:10of for a bank.

00:12Today, CBA said profit had increased 2%, dividend is up 4%, and CEO Matt Comyn said Australia

00:18has reason for optimism.

00:21So investors optimistically bid the stock up another 2%.

00:25Other banks got caught in the slipstream, retailers went up as well, and the market

00:28closed 0.4% higher.

00:31The Aussie dollar is higher because the US dollar went backwards, which it's been doing

00:34since the week before Donald Trump was inaugurated.

00:37In the three months before that, foreign exchange punters were busily doing the Trump trade,

00:42that is, betting that his tariffs would cause inflation and higher interest rates.

00:47But the Trump trade has backfired now because everyone thinks the tariffs will depress the

00:50US economy and result in lower interest rates.

00:53And the main problem, of course, is that it's just hard to keep up.

00:57The US market was flat last night, while other global markets went up.

01:01Gold and other metals reversed today, while the oil price went up because some Russian

01:05tankers headed for China were blacklisted.

01:07We got some data on new car sales today, and it's all about hybrids.

01:12Sales of plug-in hybrids surged 95% in 12 months, while sales of fully electric vehicles,

01:17as well as petrol and diesel ones, fell.

01:21And finally, as we prepare for next week's interest rate decision, this graph shows the

01:25performance of house prices during the past four interest rate easing cycles.

01:31The average rise two years after the first rate cut is about 12%.

01:36So what next week's cut, if there is one, won't do, is make houses more affordable.

01:43And that's finance.

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