Australian Stock Market Report – Afternoon 4-24-13

Afternoon Market Report

The Australian share market has closed 1.6 per cent higher as a lower than expected inflation report excited investor expectations of an interest rate cut in the near term. A majority of sectors registered strong gains. The Financial, Industrial, Health and Utilities sub-indices all gained more than 2%.

The first Quarter CPI grew by 0.4%, well below the markets expectations of a rise of 0.7%. Annual inflation growth rose from 2.2% to 2.5%. The message from today's report continues to be the fact that inflation at present is not an obstacle for the RBA. It's reasonable to suggest that interest rates can remain lower for longer period of time. Underlying inflation is in the middle of the Reserve Bank's 2-3 per cent target band. The low inflation result means the Reserve Bank can continue to talk about the scope for lower rates in the absence of any pressure to move to a more neutral stance in the near term.

The prospect of rates being lower for longer means that households will continue to feel the benefits of earlier rate cuts and the lagging sentiment that has been evident in the business sector will stand a better chance of catching up to the household experience.

Woodside Petroleum said it will finalize a US$1.2 billion deal to buy a 30% stake in a natural gas field in the Mediterranean in June. Talks were held up by a general election. Woodside had to delay discussions with Israeli lawmakers in relation to the purchase of a stake in the Leviathan gas field due to the election in January. Woodside rose 2% having risen almost 10% yesterday on announcing a special dividend and plans for an increased payout ratio.

In Europe tonight stocks are expected to start on a firm footing after strong gains in the previous session. Weaker manufacturing reports in the last day have prompted the belief that there will be additional stimulus from the ECB in the offing. The main focus in the US tonight will be on the economy. The US durables orders report for March is expected to moderate after the reading in February was boosted by aircraft purchases.

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