Source : THE AGE NEWS
By Staff reporters
The Australian sharemarket extended its gains at lunchtime amid optimism for more rate cuts after the Reserve Bank lowered its benchmark interest rate by a quarter of percentage point on Tuesday. Commonwealth Bank shares hit yet another record.
The S&P/ASX 200 was up 63.20 points, or 0.8 per cent, to 8406.50 as of 1.07pm AEST, ignoring a fall in US stocks overnight. Ten of the local bourse’s 11 sectors advanced, led by banks, energy stocks and utilities. The ASX rose 0.6 per cent in the previous session.
Reserve Bank Governor Michele Bullock raised hopes when she said the central bank had even considered a jumbo cut.Credit: Louie Douvis
The Australian dollar, which fell 0.6 per cent to 64.21 US cents overnight, was back up at 64.47 US cents at lunchtime.
At a press conference following the rate call on Tuesday, RBA governor Michele Bullock said the possibility of holding rates steady was quickly cast aside for a debate on how deeply to cut.
“There was a discussion about 50 [basis points] and 25, and the board was of the view that 25 [basis points] was the right number,” she said.
The comments were more “dovish” than expected, with the central bank forecasting slower inflation than previously, CommSec chief economist Ryan Felsman noted. His counterpart at CBA, Belinda Allen, said the bank was still predicting two more rate cuts this year, “but we now expect these to come a little quicker than before, and favour August and September.
The catalyst for the shift has been the RBA’s shift in tone on inflation.”
Lower rates ease the mortgage pressure on consumers in the cost-of-living crisis and make it cheaper for companies to borrow money, both of which bode well for corporate profits.
The big four banks, all of which have said they will pass the rate cut on in full to their customers, advanced in early trade, with CBA up 2 per cent to hit a fresh all-time high. The nation’s biggest bank – and biggest stock on the ASX – has gained 14.5 per cent this year so far. National Australia Bank climbed 2.2 per cent, while ANZ Bank gained 1 per cent and Westpac added 0.9 per cent.
The iron ore mining heavyweights were also stronger, with BHP (up 0.7 per cent), Rio Tinto (0.8 per cent) and Fortescue (up 0.1 per cent) all trading higher. But it was the gold miners who paced gains in the materials sector after spot prices for bullion jumped 1.9 per cent overnight. Northern Star Resources gained 2.9 per cent, Newmont climbed 3.5 per cent, and Evolution Mining jumped 5.1 per cent, bolstering the materials sector.
Defensive sectors such as healthcare and utilities also gained, with pharmacy giant Sigma Healthcare gaining 2 per cent and sleep treatments make ResMed rising 4.8 per cent. Power companies Origin and AGL Energy added 2 per cent and 1.1 per cent, respectively.
On the losing side, home sidings maker James Hardie slumped 5.7 per cent after saying its full-year net profit fell 17 per cent to $US424 million ($659 million) and warned that “broader macroeconomic uncertainty could further impact the cost of home construction and weigh on consumer sentiment, influencing demand” in the current year. The company makes about 75 per cent of its sales in the US.
Mayne Pharma shares plunged 30.6 per cent after the drugmaker said its US suitor Cosette Pharmaceuticals was claiming Mayne’s recent trading performance had triggered a material adverse change in their takeover agreement, which meant they would have to renegotiate for 10 days. If there’s no positive outcome for Cosette, the US company plans to terminate the deal at the end of that period. Mayne disputes that a material adverse change has occurred.
On Wall Street overnight, momentum slowed after the market’s rally from a deep hole nearly all the way back to its all-time high set earlier this year. The S&P 500 fell 0.4 per cent for its first drop in seven days, but stayed within 3.3 per cent of its record. The Dow Jones lost 0.3 per cent, and the Nasdaq composite slipped 0.4 per cent.
Tesla closed 0.5 per cent higher as CEO Elon Musk said he’s committed to still leading the carmaker five years from now and expects to pare back his political spending, assuaging some investors’ concerns about the future of his most valuable company.
Treasury yields and the value of the US dollar held relatively stable following a brief jolt on Monday morning after Moody’s Ratings said the US government no longer deserves a top-tier credit rating because of worries about its spiralling debt.
Wall Street drifted lower on Tuesday. Credit: AP
Several of the US stock market’s worst losses came from companies in the travel industry, as doubts continue about how much US households will be able to spend on holidays.
Airbnb dropped 3.3 per cent, Norwegian Cruise Line fell 3.9 per cent and United Airlines lost 2.9 per cent. Viking Holdings fell 5 per cent even though the company, which offers river cruises and other trips, reported stronger results than analysts expected for the latest quarter.
In the bond market, the yield on the 10-year Treasury edged up to 4.47 per cent from 4.46 per cent late Monday. The two-year yield, which more closely tracks expectations for action by the Federal Reserve, edged down to 3.96 per cent from 3.97 per cent.
Concern still remains that Trump’s tariffs could push the US economy into a recession. If a recession were to hit, the US government may have less room to offer support through big spending plans or direct stimulus cheques to households than in prior downturns. That’s because its government’s debt is so much higher now, and it could be set to get even bigger with Washington debating more tax cuts.
In other international markets, shares in China’s CATL, the world’s largest maker of electric batteries, jumped 16.4 per cent in its Hong Kong trading debut after it raised about $US4.6 billion in the world’s largest IPO this year.
with AP
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