MARKETS SPECTATOR: Rate cut rocket

Westpac and Commonwealth Bank shares hit new records as the S&P/ASX 200 surged following weaker-than-expected consumer price data.

Rate cut, rate cut, rate cut screamed the market after consumer prices in the three months to March 31 rose a weaker-than-expected 0.4 per cent compared to a 0.7 per cent forecast by economists.

Traders and analysts were in no doubt what the data means: a potential rate cut by the Reserve Bank of Australia.

“The RBA is being dragged back into the game sooner rather than later,” says Tim Rocks, Nomura’s Australian strategist.

At 1522 AEST the S&P/200 Index was at 5092.4, a gain of 76.167 points or 1.5 per cent. Volume was more than $5.4 billion at 1525 AEST, better than previous trading days during the week and giving optimism to those who are still bulls.

The market’s star performer may have been Westpac, which together with Commonwealth Bank, hit all-time highs at $32.655 and $71.735 respectively. Westpac’s market value has surpassed $100 billion, putting it just behind BHP in terms of market capitalisation as the second-biggest stock in the market. ANZ and National Australia Bank rose to 52-week highs.

“Anything with a yield was bought,” says Tony Paterno, a senior investment adviser at stockbrokers Ord Minnett.

Property stocks were up. Westfield Group rose 13 cents, or 1.1 per cent to $11.77 at 1527 AEST.

Retailers attracted strong buying interest on expectations a rate cut will benefit their sales. Harvey Norman rose 12 cents, or 4.2 per cent, to $2.98 at 1530 AEST. JB Hi-Fi gained 35 cents or 2.2 per cent to $16.27 at 1530 AEST.

Building related stocks also rose on expectations a rate cut will boost consumer appetite for home building and improvement. Dulux added 12 cents, or 2.7 per cent, to $4.61 and Boral increased 9.5 cents, or 1.9 per cent to $5.045 at 1534 AEST.