RBA speech dulls ASX rally

By the close, the ASX 200 was higher by 27 points, while the All Ords had added 33 points.

Picture: AAP

A rebound on the local market was dulled by the trimming of expectations of further rate cuts, after RBA governor Philip Lowe reaffirmed the board’s wait-and-see approach.

A strong Wall Street lead pushed the benchmark S&P/ASX 200 up as much as 0.9 per cent early to break through the 7000 level at 7009.3, but comments from Dr Lowe trimmed the local rally after midday as he said economic growth wouldn’t be unduly hurt by the bushfire crisis and that there were risks in having interest rates at very low levels.

By the close, the ASX 200 was higher by a more moderate 27 points, or 0.39 per cent, to 6976.1 while the All Ords had added 33 points, or 0.47 per cent, to 7080.9.

It comes as the rate cut probability for next month fell to 14 per cent from 23 per cent and with a cut not fully priced until August, from earlier expectations by July.

ANZ head of Australian economics David Plank said the speech showed a switch from the RBA to “patient mode”.

“It seems that having taken interest rates to a record low, the RBA is very much back in the mode of being patient rather than doing more to push unemployment down faster, especially given the ‘significant monetary stimulus already in place and the long and variable lags associated with monetary policy’,” Mr Plank said.

“This potentially pushes the timing of the next rate cut out considerably (data dependent, of course). It will likely take more than a few disappointing employment reports for it to become clear that the unemployment rate is trending higher. And we don’t get another inflation report until late April.”

Across Asian markets, the economic threat of coronavirus eased slightly as China’s central bank moved to ramp up its stimulus, even despite the death toll rising to near 500.

At the local close China’s Shanghai Composite and the Hang Seng were both higher by 1.6 per cent, while Japan’s Nikkei was up 1.9 per cent.

To equities and underperformance by Commonwealth Bank was a drag on the market. Shares in the market’s biggest stock slipped by 1.2 per cent to $83.28 after UBS called it out for its “world record” price-to-earnings ratio of 18.3x and said it “would not be surprised to see CBA pull back post result”.

In the rest of the majors, Westpac lost 0.3 per cent to $24.73 but ANZ added 0.6 per cent to $25.82 and NAB finished flat at $25.61.

Tech stocks outperformed after the Nasdaq set new records overnight. Afterpay surged to a record high of $40.73 early, but settled to a daily loss of 1.7 per cent at $39.20.

Altium too set a record of $41.04 and finished higher by 3.1 per cent to $41.01.

Across the rest off the high-growth WAAAX stocks, WiseTech put on 9 per cent to $26.81, Appen lifted 3.8 per cent to $26.22 and Xero edged higher by 1.4 per cent to $86.67.

Local lithium miners cheered a 14 per cent surge in Tesla shares, Pilbara Minerals added 11.3 per cent to 34.5c as Galaxy Resources soared 17.7 per cent to $1.23 and Orocobre lifted 19 per cent to $3.64.

Major miners too rebounded alongside a bounce in iron ore prices - BHP rose by 1.5 per cent to $38.89, Rio Tinto gained 1.1 per cent to $98.43 as it bowed to pressure on its supplier payments terms while Fortescue put on a more mild 0.4 per cent to $11.21.

Gold miners were out of favour after safe haven buying earlier this week – Newcrest Mining shed 0.9 per cent to $29.04, Evolution ticked lower by 1.9 per cent to $3.72 and Northern Star wound back by 1.5 per cent to $12.98.

As earnings season slowly kicks off, CIMIC posted a $1bn loss for the full year and booted its chief executive. That sent shares higher by 9.8 per cent to $30.93.

Meanwhile Genworth said a recovery in the property market helped its results, but still fell by 2.8 per cent by the close to $3.80.

Treasury Wine slipped lost 1.6 per cent to $12.18 after a warning on wine exports to China from industry group Wine Australia.

January car sales data showed the worst start to the year in more than a decade, hitting retailer AP Eagers by 1.5 per cent to $8.77.

The Australian dollar was flat against the US dollar, buying US67.39c.