ASX lifts as RBA cuts; banks drag, tech gains

Despite the lift on Tuesday, the index remains 10.5 per cent lower from its recent record high.

Sanitation worker wearing a raincoat walking past red lanterns in Wuhan in China's central Hubei province. Picture: STR / AFP.

The drag from the major banks sapped a rise of as much as 3 per cent on the local market, after the Reserve Bank of Australia (RBA) cut rates to a new low of 0.5 per cent.

A surge of 5.1 per cent on the Dow Jones Industrial Average provided a strong lead for local shares to highs of as much as 6524.3, but those gains quickly faded as investors mulled the likely flow on effects of the RBA’s cut.

At its height, the benchmark S&P/ASX 200 was up by 133 points, but by the close, shares were up a more moderate 44 points, or 0.69 per cent, to 6435.7.

Despite the lift, the index remains 10.5 per cent lower from its recent record high of 7197.2.

Meanwhile, the All Ordinaries put on 51 points, or 0.78 per cent, to 6511.6.

Plans for co-ordinated global stimulus from major central banks was a key driver for the rebound in markets, with the RBA’s move likely to be the first of a round of rate cuts.

The RBA board noted that “the global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target”, as it said it was prepared to cut further if required.

The announcement weighed heavily on the major banks to reverse early gains, as all four passed on cuts in full.

By the close, Commonwealth Bank shares were down 1.7 per cent to $79.11, with the company overtaken by heavyweight healthcare leader CSL as the market’s largest stock by value. Westpac lost 1.1 per cent to $22.94, NAB wound back by 1.4 per cent to $24.13 while ANZ ticked lower by 1.4 per cent to $24.

Some talk of a 50 basis point cut did deliver a slight lift to the Aussie dollar after the statement was released, to highs of US65.61c, before settling to US65.53c at the close.

Westpac head of rates strategy Damien McColough notes that bond yields rose slightly on the news, but were still on a downwards trajectory.

“We would not expect that slightly bearish response to be sustained, however, as the RBA messaging was strongly dovish. It is closely monitoring developments and the “ … board is prepared to ease monetary policy further to support the Australian economy”.

“As a result there is now a 90 per cent chance of a follow-up rate cut in April factored in. Our expectation is that an April rate cut will be delivered and that suggests that the three- year bond yields do not have much scope to rise materially from current levels, if they do at all.”

Across the rest of the market, CSL’s 2.25 per cent rise to $313 apiece took the company to pole position in the market, now the largest stock by value.

Meanwhile, Cochlear added 5.1 per cent to $218 and ResMed ticked higher by 5 per cent to $24.49.

Miners enjoyed a lift thanks to a rebound in commodity prices – BHP edged higher by 1.9 per cent to $33.99, Rio Tinto put on 2.9 per cent to $88.80 and Fortescue rose by 3.3 per cent to $9.47.

Supermarkets came into focus as consumer panic of the coronavirus spread spurred stockpiling of key items such as toilet paper. Woolworths edged lower by 1.6 per cent to $38 while Coles put on 3.1 per cent to $15.13.

Clinuvel Pharma soared by 6.4 per cent to $18.19 on potential developments with the US Food and Drug Administration.

But the best performing sector was tech – adding 2.5 per cent thanks to a 6.2 per cent lift in Afterpay to $34.66 while Appen added 2.7 per cent to $22.80 and Xero rose by 7.2 per cent to $79.94.

Ex-dividend trade weighed on Medibank, pulling shares down by 1.2 per cent to $2.70 by the close, while Oil Search was down by 2 per cent to $5.43.