US concerns pressure overseas markets

As the dust settles after the US presidential elections, markets have turned their focus to the complications surrounding the US budget deficit.

Dubbed the 'fiscal cliff', this refers to a deadline on midnight December 31 when a combination of temporary US tax cuts will end and new tax increases will begin. The fear being the combination of these factors could reduce economic activity and possibly force the US back into recession.

Although there will be plenty of political scaremongering, it is hard to see a country that is printing unlimited amounts of cash to stimulate the economy allowing previous government decisions and agreements to aggressively block the path to recovery. Taking Stock feels another delay or amendment coming.

While US worries continue to pressure overseas markets, the ASX 200 faired well considering the majority of the weakness was due to three of the four major banks going ex dividend, losing only 57 points - or about 1.3 per cent - over the two days the Dow fell close to 450 points, or about 3.3 per cent.

On the Australian market, the banks continued to be the main focus with ANZ, WBC and NAB all going ex dividend and CBA announcing its quarterly trading update.

The CBA lifted its first quarter cash profit despite low loan demand and higher funding costs and is on track for another year of record net profit, in the vicinity of $7.2 billion.

However, with the trend of slow loan growth confirmed in the bank reports, the Big 4 would have been concerned with news that Macquarie Group (MQG) has teamed up with Mark Bouris' Yellow Brick Road (YBR) to re-enter retail home loan banking that it had largely exited during the global financial crisis.

Mark Bouris is the founder of Wizard Home loans, but is probably best known for the Australian television version of The Apprentice.

YBR's Macquarie-backed opening move is a 1.15 per cent discount off the base rate of 6.65 per cent for the first 12 months on residential home loan products and then a guaranteed discount off the base rate of up to 0.86 per cent for the life of the loan. The key point is that this is an offer to all successful loan applicants, not just a chosen few.

Finally, it is hard not to mention QBE Insurance (QBE), after it updated the market on the financial impact of superstorm Sandy to the company's 2012 forecast results.

During trading on Monday, the stock was down $2 or 15.5 per cent after QBE informed the market that its preliminary estimate of losses from Sandy was between $350 million and $450 million, reducing its 2012 insurance profit margin down from 12 per cent to 8 per cent, or nearly a 35 per cent drop.

·To subscribe to Adam Farrall's weekly market update, contact him at Sentinel Stockbroking on 9225 0020 or email afarrall@sentinelgroup.com.au

_Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time. _