Australia Market gains on door ajar for rate cut as inflation stalls

Headline indices of the Australian stock market climbed up to an 11-year high on Wednesday, 24 April 2019, after weaker-than-expected inflation data boosted bets on lower interest rates. Gains were recorded across all sectors, barring materials and energy, with financials, realty, information technology, and healthcare issues leading the charge. Around late afternoon, the benchmark S&P/ASX200 index advanced 55.28 points, or 0.9%, at 6,374.70 points, the highest level since January 2008, while the broader All Ordinaries added 51.73 points, or 0.8%, at 6,462.80.

The ASX200 last reached such heights in January 2008 before the GFC wiped about 50% of the value off the Australian share market. Australian stock market will close on Thursday for ANZAC day holiday.

The Australian inflation evaporated in the March quarter. Australia's headline inflation rate softened to just 0.1% for the March quarter pushing the annual rate down to 1.3% from 1.8% in seasonally adjusted terms in the previous quarter, and was the lowest since September quarter of 2016. The key annual core measure watched by the Reserve Bank of Australia - the trimmed mean inflation - came in at 0.3 for the quarter pushing the annual rate down to 1.6%, much lower than the RBA's forecast of 1.8%.

The weaker inflationary data may prompt the RBA to tilt towards more of a cut than a hike. The last time inflation was this tepid, the RBA had responded by two rate cuts in 2016 - one in May and the other in August.

Policymakers have become increasingly worried with slower global growth and the status of US-China trade relations. Downside risks to the global outlook have increased stated in the monetary policy statement of February 2019. A similar message was echoed in the RBA meeting minutes released earlier this month.

Looking ahead, the market participants will be eyeing the upcoming meeting in Beijing between Chinese officials and US Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin. This will be followed be a visit with Vice Premier Liu He who will lead a Chinese delegation to Washington on May 8. While the US-China trade war looks like it is coming to an end, fears over slower global growth may weigh on the Aussie along with concerns over another US-led trade war, particularly with Europe and possibly Japan.

Healthcare was higher, with pharma giant CSL, hearing implant maker Cochlear and ultrasound probe disinfector Nanosonics among those up by 2% or more.

Financials were higher, with all four of the big banks in the green, with Westpac's 1.66% gain making it the best of the quartet.

Shares of materials and resources declined as strength in the USD has put some downward pressure on commodity prices, particularly base metal prices.Miners South32 (S32) and BHP Group (BHP) were down 1.7% and 0.4% respectively.

CURRENCY: The Australian dollar declined against the U.S. dollar on Wednesday, after weaker-than-expected inflation data boosted bets on lower interest rates. The Australian dollar was quoted at 70.42 cents, from 71.19 on Tuesday.

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