Financial stocks take hit after rates decision

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 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.

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