How quickly things change.
After first quarter economic numbers from China and the April flash purchasing managers index seemed to confirm the bears’ perception the most important buyer of Australian exports was slowing precipitously; a benign Australian first-quarter consumer price rise of 0.4 per cent had everyone talking a rate cut. This has fueled a buying spree of yield stocks that may well continue.
As one trader told Business Spectator: “the market is being driven by a thematic, top down interest rate driven theme.”
Can anything stop shares in the biggest four Australian banks from surpassing previous highs? In the short-term there is little to suggest so. ANZ Bank, Commonwealth, NAB and Westpac offer yields of about 6 per cent compared with deposit rates of about 3 per cent. Simple, no?
Expectations of a cut by the Reserve Bank may help the shares of retailers as diverse as Harvey Norman and JB Hi-Fi to the supermarket duopoly Wesfarmers and Woolworths. Building related stocks may also continue to gain as a central bank cut may help lift property related businesses. Dulux and Boral have made notable recent gains.
Miners sold off after this week’s Chinese PMI data may also gain. Analysts say their shares are pricing in commodity prices far below their current levels. With no signs that iron ore prices are wobbling from around their current levels of about $130 a tonne, the world’s biggest iron ore miner, Rio Tinto, and the world’s biggest mining company, BHP Billiton, as well as gold miner Newcrest, may yet be caught up in the market euphoria. The gold price is recovering from recent falls. In New York trading it was up 2.8 per cent to $US1,464 a troy ounce.
“Global share markets are in a sweet spot at present,” says Matt Sherwood at fund manager Perpetual. Who will be against Australia joining the festivities, particularly on a Friday?