RBA rate decision sends ASX lower
The Reserve Bank left rates on hold but gave a clear signal it was likely to do so soon but the Australian sharemarket first tumbled before bouncing to close slightly lower.
Following a 0.6 per cent gain on Wall street last night the S&P/ASX 200 index rose 0.5 per cent at the open, but it sold off to breakeven ahead of the Reserve announcement, dived to a 0.9 per cent loss and settled down 25 points, or 0.42 per cent at 5933.9.
The Australian dollar jumped US0.6� to US78.25� despite the Reserve saying Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target.
Westpac economists trimmed the December-quarter GDP growth forecast to 0.5 per cent from 0.6 per cent, quarter-on-quarter after net exports matched forecasts for a 0.7 per cent increase but public demand, which represents 20 per cent of the economy, increased just 0.3 per cent, well short of the 0.7 per cent forecast.
"Of concern, the terms of trade declined by a further 1.7 per cent in the quarter, to be 10.8 per cent lower over the year," Westpac economist Andrew Hanlan said. "Global commodity prices tumbled in 2014 as supply expanded and China's economy slowed. That represents a significant negative income shock to Australia."
Government 10-year yields rose 4.6 points to 2.54 per cent while US 10-years rose 7 points to 2.07 per cent.
Regional sentiment was again capped by the muted response to Chinese rate cuts over the weekend.
The Shanghai composite index was down one per cent at the close of the ASX.
Copper tumbled 1.3 per cent to $US a tonne while Dalian iron ore futures were flat. Spot iron ore firmed 0.4 per cent to $US62.83 a tonne yesterday.
Brent crude oil fell 3 per cent to $US60.50 a barrel.
In Tokyo the Nikkei index slipped per cent.
Last night US stocks rallied despite another round of disappointing US data.
US personal income missed forecasts with a 0.3 per cent increase while personal spending fell 0.2 per cent and construction spending tumbled 1.1 per cent.
More to come…
