RBA keeps market at five-year highs
The ASX opened softly, but rebounded after the RBA released minutes from its September meeting which said while another interest rate cut was possible, it was not imminent. Investors interpreted that as the central bank keeping its foot on the easing pedal, which would further support the equities market.
The benchmark S&P/ASX 200 Index edged 3.2 points, or 0.06 per cent, higher to 5251.2, while the broader All Ordinaries firmed 3.5 points, or 0.07 per cent, to 5245.2.
Financial stocks led the turnaround, with the sector strengthening 0.6 per cent. The biggest company on the ASX, Commonwealth Bank, rose 0.6 per cent to $73.60. NAB advanced 1.7 per cent to $34.68.
But gains across the broader market were limited, as the US Federal Reserve prepared to decide the future of its $US85 billion-a-month stimulus program. Gold stocks were undecided if the Fed would begin trimming the stimulus, which has resulted in bullion rising 70 per cent from December 2008 to June 2011 as the US central bank pumped more than $US2 trillion into the financial system by buying debt.
Spot gold rose 0.03 per cent to $US1313.76 an ounce, after falling 1 per cent in the previous session to a five-week low of $US1303.85. The modest gain brought little joy to gold miners. Australia's biggest listed producer, Newcrest, tumbled 2.3 per cent to $12.34. Kingsgate slid 4.8 per cent to $1.70, while St Barbara, the ASX's worst performer, fell 9 per cent to 55.5¢.
"Everyone is just holding their breath about what is going to happen in the US," Baillieu Holst equity partner Richard Morrow said. "Larry Summers pulling out of the race for the Fed chairmanship has wrong-footed a few players."
Equity Trustees chief investment officer George Boubouras said the Fed's policy meeting was the "challenge for the week," saying "I believe they must maintain all mortgage-backed security buying in the market every month and taper off on the government bonds, therefore still being supportive of the US housing-led recovery."
Bigger miners finished lower after Chinese steel futures fell on Monday, hitting their lowest in more than six weeks.
TPG Telecom was one of the day's best performers, gaining 14.3 per cent to $4.23.
Frequently Asked Questions about this Article…
The ASX held near five-year highs after the RBA's September minutes signalled another interest-rate cut was possible (but not imminent). Investors took that as the central bank keeping its foot on the easing pedal, which helped support equities while the S&P/ASX 200 edged up to 5251.2.
The minutes saying a rate cut was possible—but not imminent—led investors to interpret the RBA as still easing policy, which helped lift risk assets. The market opened softly but rebounded after the minutes were released, with financials among the beneficiaries.
Financial stocks led the turnaround, strengthening about 0.6%. The biggest ASX company, Commonwealth Bank, rose 0.6% to $73.60 and NAB advanced 1.7% to $34.68, helping underpin the market gains.
Uncertainty around the US Fed's decision on its $US85 billion/month stimulus limited broader gains. Gold was mixed—spot gold rose slightly to $US1313.76 after a recent dip—but gold miners were weak (Newcrest fell 2.3% to $12.34, Kingsgate slid 4.8% to $1.70 and St Barbara dropped 9% to 55.5¢).
Bigger miners were pressured after Chinese steel futures fell on Monday to their lowest in more than six weeks, a sign of weaker demand that can weigh on mining stocks.
Baillieu Holst equity partner Richard Morrow said investors were "holding their breath" over US developments and noted Larry Summers pulling out of the Fed race had surprised some players. Equity Trustees CIO George Boubouras described the Fed meeting as the week's key challenge and suggested the Fed should maintain mortgage-backed security buying while tapering government bond purchases to support the housing-led recovery.
TPG Telecom was one of the best performers of the day, gaining 14.3% to $4.23, according to the article's trading summary.
The article suggests RBA comments provided local support for equities, especially financials, but US Fed decisions and global commodity signals (like Chinese steel futures) create uncertainty—so investors should watch central bank guidance, commodity trends, and sector-specific moves such as banks, miners and gold stocks.
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