THE sharemarket closed weaker after the Reserve Bank unexpectedly kept interest rates on hold, and the National Australia Bank and Macquarie Group posted results that disappointed the market.
The benchmark S&P/ASX200 index fell 21.8 points, or 0.51 per cent, to 4274.2, while the broader All Ordinaries was down 19.7 points, or 0.45 per cent, at 4344.9. The March share price index futures contract was 10 points lower at 4246.
CommSec economist Craig James said it was no surprise the market slumped following the Reserve's decision to maintain its cash rate at 4.25 per cent. He said it preferred to wait on the outcome of Greek debt talks before changing rates.
Many economists were expecting a rate cut of 25 basis points to 4 per cent. "Lower interest rates would have served to boost the competitiveness of shares and property compared with cash-based investments and bonds," Mr James said.
However, he said the door was ajar to a future cut depending on developments in the European debt crisis.
"At this stage we are factoring in a move in May, after the next [Australian] inflation figures," he said.
CMC Markets trader Ben Taylor said financial stocks took a hit from the decision because it meant a lack of stimulation to lending demand.
NAB said higher funding costs were affecting its business, after it posted unaudited cash earnings in the three months to December 31 of $1.4 billion, up from $1.3 billion for the previous corresponding period. Shares fell 96?, or 3.97 per cent, to $23.21.
Among the other banks, ANZ rose 3? to $21.36, Westpac fell 11? to $20.92 and Commonwealth Bank fell 33? to $50.51. Investment bank Macquarie Group warned of a 25 per cent drop in net profit for the current year amid difficult market conditions. Its shares fell 20? to $25.90.
Among consumer discretionary stocks, Myer was down 4? and David Jones was 5? weaker at $2.51.
Miner BHP Billiton, which releases its half-year results today, was down 31? at $37.90 and Rio Tinto fell $1.29, or 1.78 per cent, to $71.01.
Leading hearing device developer Cochlear jumped $4.41, or 7.59 per cent, to $62.52 after investors were relieved its $20 million net loss was lower than expected. This compared with a $87.2 million net profit for the previous corresponding period. The loss was due to the $100 million-plus cost of recalling its faulty Nucleus C1500 devices.
Spot gold was $US1721.10 per ounce, down $US13.67. Goldminer Newcrest, which is slated to deliver its first-half results on Friday, was down 38? at $33.54.
Preliminary market turnover was 1.84 billion shares worth $4.65 billion.
Frequently Asked Questions about this Article…
How did the Reserve Bank interest rate decision affect the ASX200 and overall market?
The sharemarket closed weaker after the Reserve Bank unexpectedly kept the cash rate on hold at 4.25%. The S&P/ASX200 fell 21.8 points (about 0.51%) to 4,274.2 and the All Ordinaries dropped 19.7 points to 4,344.9. March share price futures were also lower, reflecting the market reaction to the interest rate hold.
Why did financial stocks take a hit after the Reserve Bank kept rates on hold?
Traders said the RBA’s decision reduced the chance of a near-term boost to lending demand. CMC Markets trader Ben Taylor noted financial stocks were hit because keeping rates unchanged meant less stimulus to borrowing and loan growth, which can weigh on bank earnings and share prices.
What did National Australia Bank (NAB) report and how did investors respond?
NAB reported unaudited cash earnings of $1.4 billion for the three months to December 31, up from $1.3 billion a year earlier. Despite the higher cash earnings, NAB shares fell to $23.21 as investors reacted to the broader market and funding-cost pressures the bank flagged.
What was Macquarie Group's profit outlook and how did that affect its share price?
Macquarie Group warned of a 25% drop in net profit for the current year due to difficult market conditions. Following the profit warning, Macquarie’s shares fell to $25.90 as investors priced in the weaker outlook.
How did other major Australian banks move on the day?
Other major bank shares moved mixed: ANZ rose to $21.36, Westpac fell to $20.92 and Commonwealth Bank shares fell to $50.51. These moves reflected company-specific factors and the wider market reaction to the RBA decision.
What happened to big miners like BHP Billiton and Rio Tinto after the rate decision?
Miners fell on the day: BHP Billiton traded down to $37.90, and Rio Tinto fell $1.29 (about 1.78%) to $71.01. BHP was also preparing to release half-year results which may have influenced its share movement.
Why did Cochlear shares jump and what role did the product recall play?
Cochlear shares jumped $4.41 (7.59%) to $62.52 after investors were relieved its $20 million net loss was smaller than expected. The loss was driven by the more than $100 million cost of recalling faulty Nucleus C1500 hearing devices, but the smaller-than-feared loss lifted investor sentiment.
What other market indicators and commodity prices were mentioned that everyday investors should note?
Spot gold was reported at US$1,721.10 per ounce, down US$13.67. Market turnover was preliminary at 1.84 billion shares worth $4.65 billion. Newcrest, a gold miner slated to report results, was trading down to $33.54. These indicators give a snapshot of trading activity and commodity price pressure on the day.
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