On a Thursday in mid-May, the Australian sharemarket closed at a three-month high, its eighth consecutive gain, as traders in Sydney leaned toward the belief that money would soon grow cheaper on both sides of the Pacific. The lift came from American figures that disappointed, where producer prices fell sharply and consumer spending softened, nudging hopes that the Federal Reserve will loosen its grip. Yet the market still looks past a surprising rise in Australian jobs, betting that the Reserve Bank will trim its cash rate on Tuesday. It is a reminder that markets often move less on what has
ASX Closes at Three-Month High as Rate-Cut Bets Build; Dicker Data Co-Founder Steps Back
Eight straight gains, and Tuesday's rate decision still to come
Mark
Eight straight gains sounds like a big run. What actually drove it?
Mimi
Mostly US data. Producer prices fell by the most in five years and retail sales were soft, so people bet the Fed will ease. Ten-year Treasury yields dropped 10 basis points.
Mark
And Australia just followed along?
Mimi
Largely, yes. Real estate led the market, and those stocks are the most sensitive to rates. Goodman rose 2.9 per cent and Vicinity 2.2 per cent.
Luke
But Australian jobs surprised on the upside on Thursday. Doesn't that cut against a rate cut?
Mimi
It could, and the report says bond traders shrugged it off. They're still pricing a quarter-point cut on Tuesday.
Luke
Worth saying that's what traders are betting, not what the RBA has decided. Nothing is confirmed until Tuesday.
Mark
What about the Dexus story?
Mimi
Australia Pacific Airports' board alleges a breach of confidentiality arrangements. If it's upheld, Dexus could have to sell its Melbourne Airport stake.
Luke
Right, and that's an allegation. The report doesn't say whether Dexus disputes it or how it would be resolved.
Mark
And Dicker Data?
Mimi
The shares closed down 1.4 per cent, then minutes later the company said David Dicker, co-founder and chief executive, was stepping back. We don't yet know how the market will react.
Luke
Or what stepping back means in practice. The report gives no details on succession or timing.
El Pulso
- The S&P/ASX 200 climbed to 8343.7, its eighth straight daily gain, yet still sits about 3 per cent below its February peak.
- Weak US producer prices and soft retail sales sent ten-year Treasury yields down 10 basis points and fuelled bets on Fed easing.
- A surprise jump in Australian employment threatens to complicate the case for a rate cut, but bond traders are still wagering on one.
- Rate-sensitive stocks like Goodman and Vicinity led the rally, while Dicker Data's chief executive stepped back after the close, leaving investors with an unpriced surprise for Friday.
- All eyes now turn to Tuesday's RBA decision, which will determine whether this rally has firm footing or was built on expectation alone.
On a Thursday in mid-May, the Australian sharemarket closed at a three-month high, its eighth consecutive gain, as traders in Sydney leaned toward the belief that money would soon grow cheaper on both sides of the Pacific. The lift came from American figures that disappointed, where producer prices fell sharply and consumer spending softened, nudging hopes that the Federal Reserve will loosen its grip. Yet the market still looks past a surprising rise in Australian jobs, betting that the Reserve Bank will trim its cash rate on Tuesday. It is a reminder that markets often move less on what has happened than on what they expect to happen next.
The Australian sharemarket finished the week at a three-month high, with the S&P/ASX 200 rising 0.6 per cent to 8343.7. It was the eighth straight day of gains, and the benchmark now sits about 3 per cent below its February 14 peak. The momentum followed the Wall Street lead, as American data came in weaker than forecast.
US producer prices fell by the most in five years, and April retail sales pointed to softer consumer demand. Together these figures sharpened speculation that the Federal Reserve will ease policy, and ten-year Treasury yields slid 10 basis points. Local investors responded by pushing rate-sensitive stocks higher. Goodman Group and Vicinity Centres led the gains, and gold miners rallied even as the metal itself retreated.
At home, traders chose to look past a surprise jump in employment. They are still betting the Reserve Bank will cut the cash rate by a quarter of a percentage point on Tuesday. Not every company shared in the mood. Commonwealth Bank touched a record before slipping back, and Dexus fell after a dispute over confidentiality that could cost it its stake in Melbourne Airport. Dicker Data closed lower, and minutes later its co-founder and chief executive announced he was stepping back, news the market has yet to absorb.
The Australian sharemarket finished the week at a three-month high. The S&P/ASX 200 rose 0.6 per cent, or 46.2 points, to 8343.7 at the closing bell, its eighth straight day of gains. For the week the benchmark climbed 1.4 per cent, and it now sits about 3 per cent below its February 14 peak. The All Ordinaries also gained 0.6 per cent.
The push came from data on both sides of the Pacific that strengthened expectations of central bank easing. Local shares followed the S&P 500 higher after US figures came in weaker than forecast. US producer prices fell by the most in five years, and April retail sales pointed to soft consumer demand. Together they sharpened speculation that the Federal Reserve will loosen policy, and ten-year US Treasury yields slid 10 basis points.
In Australia, bond traders looked past Thursday's surprise jump in employment. They are still betting the Reserve Bank of Australia will cut the cash rate by a quarter of a percentage point on Tuesday.
Seven industry sectors finished in positive territory, with real estate leading. Rate-sensitive names did the work: Goodman Group rose 2.9 per cent to $31.82 and Vicinity Centres gained 2.2 per cent to $2.34. Miners helped too. Gold stocks climbed even as the price of the metal reversed, with Evolution Mining and Newmont Corporation each up 3.6 per cent, closing at $7.87 and $77.42. Among the iron ore heavyweights, BHP rose 1.4 per cent to $39.72.
Commonwealth Bank saw some profit-taking. The shares touched a fresh record of $172.91 earlier in the session, then slipped 0.1 per cent to close at $169.66.
Several companies moved on their own news. Dexus fell 1.1 per cent to $7.23 after the board of Australia Pacific Airports Corporation alleged the company had breached confidentiality arrangements. If that allegation is upheld, Dexus could be forced to sell its stake in Melbourne Airport.
Appen jumped 18.7 per cent to $1.46 after setting a full-year revenue target of between $235 million and $260 million. Insurance Australia Group dropped 2.8 per cent to $8.65 after UBS cut its rating on the stock to neutral.
Dicker Data closed 1.4 per cent lower at $8.49. Minutes later, the company announced that co-founder and chief executive David Dicker was stepping back from the business. The announcement came after the close, so the market has yet to price it in.
Attention now turns to Tuesday and the RBA decision, which markets expect to be a quarter-point cut despite the stronger jobs numbers.
Citas Notables
Australia Pacific Airports Corporation's board alleged Dexus breached confidentiality arrangements, which could force a sale of its Melbourne Airport stake if upheld.— Report on the Dexus allegation
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