RBA statement leads energy stocks lower
The S&P/ASX 200 Index finished down 0.1 per cent at 5105.6 points, while the broader All Ordinaries slipped 5.8 points, or 0.1 per cent, to 5088.
The Reserve Bank cut the cash rate by a further 25 basis points to 2.5 per cent, in a widely expected decision. The bank's statement was slightly less dovish than previously, leading some observers to reduce their expectations of another rate cut.
The dollar jumped about half a cent to US89.8¢ after the rates decision, while shares slipped down before recovering a little in late trade.
Westpac analysts Damien McColough and Timothy Jung expected the market's bearish reaction to the rate cut to be short-lived. "While the RBA rhetoric appears to be more neutral in terms of its forward guidance, there is little to suggest that the easing cycle is at an end," the pair said. "The more neutral guidance will have disappointed those looking for a 50 basis points cut, or signs that the RBA were more concerned with the domestic demand profile. [But] we will remain buyers into the current dip."
RBS Morgans private client adviser Bill Bishop said political debate over the significance of the rate cut may have hurt investor sentiment.
"There's been so much of that that I think a little bit may have been imprinted on the stockmarket," he said.
The energy sector was the market's worst performer, sliding 1 per cent. Woodside led the plunge falling 46¢, or 1.2 per cent, to $38.76. Santos was down 1.2 per cent at $13.87, while Origin Energy finished 0.8 per cent weaker at $12.03.
Among the miners, index heavyweight BHP Billiton finished 13¢, or 0.4 per cent, lower at $35.62, while Rio firmed 24¢, or 0.4 per cent, to $59.86.
Telstra was among the best-performing stocks, rising 0.4 per cent to $5.07.
Hearing implant maker Cochlear gained 85¢ to $60 after its yearly profit more than doubled to $133 million.
But engineering company Downer EDI lost 2¢ to $3.89 even though it posted annual profit growth, as it warned of a challenging year ahead amid mining sector weakness.
Frequently Asked Questions about this Article…
The S&P/ASX 200 slipped 0.1% after the Reserve Bank cut the cash rate by 25 basis points to 2.5% but issued a slightly less dovish statement. That more neutral rhetoric reduced some investors' expectations of further rate cuts and, together with weakness in energy stocks, nudged the market into the red.
After the RBA decision the Australian dollar jumped about half a cent to around US89.8¢. Analysts noted the initial bearish reaction in equities may be short‑lived, but the bank's more neutral forward guidance disappointed those expecting a larger cut, which weighed on sentiment.
The energy sector was the worst performer, sliding about 1%. Major energy names fell: Woodside dropped 46¢ (1.2%) to $38.76, Santos fell 1.2% to $13.87, and Origin Energy finished 0.8% weaker at $12.03.
Yes. Index heavyweight BHP Billiton finished 13¢ (0.4%) lower at $35.62, while Rio Tinto firmed 24¢ (0.4%) to $59.86, showing a mixed reaction among large miners.
Telstra outperformed, rising 0.4% to $5.07. Cochlear also rallied—up 85¢ to $60—after reporting its yearly profit more than doubled to $133 million.
Westpac analysts Damien McColough and Timothy Jung said the market's bearish reaction was likely to be short‑lived. They noted the RBA's guidance looked more neutral but saw little to suggest the easing cycle was over, and said they would remain buyers into the current dip.
RBS Morgans private client adviser Bill Bishop suggested that political debate over the significance of the rate cut may have hurt investor sentiment, potentially imprinting on the stockmarket's cautious response.
Downer EDI fell 2¢ to $3.89 even though it posted annual profit growth; the company warned of a challenging year ahead amid mining sector weakness. For investors, that highlights how forward guidance and sector conditions can override recent profit gains.
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