Australian Stock Market Report – Afternoon 5-7-13

MARKET CLOSE REPORT

(5pm AEST)

The Reserve Bank of Australia's (RBA) somewhat surprise decision to cut rates for the first time this calendar year helped reduce market weakness. The All Ordinaries Index (XAO) slipped by just 0.2 per cent or 11 pts to 5,122.7. At around 2.45pm (AEST), the ASX200 index was up by 0.2 per cent while the Australian dollar hit a low of US101.7 cents just before 3pm (AEST).

The RBA slashed rates from 3 per cent to a historic 53-year low of 2.75 per cent today. The market was split over the likelihood of a cut, however most economists saw no change as more of a probability. In the RBA's accompanying statement, the door was left open for further rate cuts down the track. Despite all the initial excitement, CommSec's Chief Economist, Craig James rightly pointed out that "...around a third of people own their homes, a third rent and a third are paying off home loans. So only a third of families will potentially benefit from the rate cut."

Earlier in the session, Australia recorded its first trade surplus in 16 months. A surplus of $307 million was posted in March, thanks to better weather, which boosted iron ore exports. For those questioning China's importance to Australia, remember that around 30.7 per cent of our exports make their way to China, while 61,600 Chinese tourists came to Australia in just one month.

The retailers initially were boosted by the 25 basis point (bps) RBA rate cut, as more money saved by mortgage holders theoretically help the retailers. Department store owner David Jones (DJS) still slipped by 1.04 per cent or 3 cents to $2.85. Its competitor, Myer (MYR) dropped by 1.35 per cent or 4 cents to $2.93 while Harvey Norman (HVN) managed to rise by 0.7 per cent or 2 cents to $2.87.

The mining sector was the main standout, with BHP Billiton (BHP) up 2.43 per cent or 80 cents to $33.67 while the smaller Rio Tinto (RIO) jumped by 2.12 per cent or $1.19 to $57.39.

1.84bn shares exchanged hands today, worth $5.07bn. 459 stocks ended in the black, 437 finished lower while 364 closed unchanged.

Looking ahead, industrial production along with government and trade numbers will all be issued in France tonight. Germany factory orders are also scheduled for release.

In the US, a consumer credit reading (which measures the change in the total value of outstanding consumer credit that requires instalment payments) along with a speech by the Treasury Secretary will be the highlights.

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