Market defies China growth concerns
Economists also said Australia's dollar remained in a fragile condition, with a risk that it could break under the US90¢ level soon.
For the week, the benchmark S&P/ASX 200 Index jumped 132.2 points, or 2.7 per cent, at 4973.9, while the broader All Ordinaries Index rose 131.1 points, or 2.7 per cent, at 4957.5 points.
Economists said the Reserve Bank would likely cut rates at its August meeting, given the surprising rise in jobless figures.
Bureau of Statistics data on Thursday showed a rise in the Australian unemployment rate by 0.1 percentage points to 5.7 per cent.
The full-time unemployment rate has now risen to 6.1 per cent, which is the highest rate since the global financial crisis.
However, financial markets have not fully priced in a rate cut - there is a two-thirds chance of a 25 basis point cut next month - because they are waiting for second-quarter inflation figures, which will be released on July 24.
The Australian dollar has been an interesting one to watch. It remains volatile, likely to rise or fall by 2¢ in a session. But interestingly, currency strategists point out that the correlation between daily changes in dollar and both commodity prices and yield spreads have crashed to multi-year lows. They have also pointed out something else:
"[The dollar's] correlation with the Australia-US two-year swap yield spread is near zero, last seen in the depths of the global crisis in Oct 2008," Westpac's senior strategist Sean Callow said.
"This is despite the Reserve Bank rate cut in May, that obviously hurt the Australian dollar, and the related soft domestic data and China growth concerns that have weighed on Australian yields."
For the week, Alumina rose 4.5¢, or 4.3 per cent, at $1.09, despite its giant aluminium-producing partner Alcoa posting a large quarterly loss.
Billabong International fell 3¢, or 11.5 per cent, to 23¢, after chief executive Launa Inman said trading conditions in the Americas had "turned a corner", while things remained tough for its Australian and European operations.
CSR fell 7¢, or 2.9 per cent, to $2.28, even though the building products maker said it expected construction of new houses to improve in the months ahead.
Newcrest Mining rose $1.36, or 12.7 per cent, at $12.09. The embattled goldminer told workers at its Telfer mine in Western Australia some would lose their jobs in the next six to 12 months.
Telstra rose 7¢, or 1.5 per cent, at $4.83, after the company said it planned to send 170 full-time jobs to India.
Whitehaven Coal slipped 12¢, or 5.2 per cent, at $2.18. Work at Whitehaven's Maules Creek mine in NSW was disrupted by protesters who said the project would destroy local heritage sites.
Frequently Asked Questions about this Article…
The Australian sharemarket jumped nearly 3% this week. The S&P/ASX 200 rose 132.2 points (2.7%) to 4,973.9, while the All Ordinaries climbed 131.1 points (2.7%) to 4,957.5 — a strong weekly gain despite concerns about slower China growth.
Although Chinese officials warned growth could slow, economists said the market rally was supported by rising expectations the Reserve Bank of Australia (RBA) will cut interest rates after a surprising rise in unemployment. That prospect, plus other local factors, helped the market lift even with China growth worries in the background.
Economists expect the RBA is likely to cut rates at its August meeting because of the recent rise in jobless figures. Financial markets put about a two‑thirds chance on a 25 basis‑point cut next month, but many investors are waiting for the second‑quarter inflation figures due on July 24 before fully pricing a move.
The Australian dollar is described as fragile and volatile — able to move about 2¢ in a session — with a real risk it could fall below US90¢. Currency strategists also note correlations between the dollar, commodity prices and yield spreads have fallen to multi‑year lows, meaning the AUD is behaving less predictably than usual.
Australian Bureau of Statistics data showed the unemployment rate rose 0.1 percentage points to 5.7%, while full‑time unemployment rose to 6.1% (the highest since the global financial crisis). That unexpected weakening in the labour market pushed economists to expect an RBA rate cut, influencing market sentiment.
Several companies moved sharply: Alumina rose 4.3% to $1.09 despite partner Alcoa posting a large quarterly loss; Billabong International fell 11.5% to $0.23 after its CEO said Americas trading had "turned a corner" but Australian and European operations remained tough; CSR fell 2.9% to $2.28 despite expecting new house construction to improve; Newcrest Mining jumped 12.7% to $12.09 even as it warned some Telfer mine workers could lose jobs; Telstra rose 1.5% to $4.83 after announcing plans to send 170 full‑time jobs to India; and Whitehaven Coal slipped 5.2% to $2.18 after protests disrupted work at its Maules Creek mine.
The article notes Alumina rose 4.3% to $1.09 despite its aluminium‑producing partner Alcoa reporting a large quarterly loss. The report does not give a specific market explanation for Alumina’s rise, only that the stock increased despite Alcoa’s weaker result.
Newcrest Mining told workers at its Telfer mine in Western Australia that some jobs could be lost over the next six to 12 months. Despite this announcement, Newcrest’s shares rose sharply — up 12.7% to $12.09 during the week — according to the article.
Call 1300 880 160
Start a chat
Schedule a call
