Australia Market gains on Fed Chief's dovish stance on rate change

Headline indices of the Australian financial market were slight higher on Wednesday, 27 February 2019, shrugging off a sluggish lead from Wall Street overnight, as investor risk sentiments underpinned after Federal Reserve Chairman Jerome Powell reinforced the US central bank's recent shift towards a more "patient" approach on policy in the face of a slowing economy. Most of ASX sectors inclined, with shares in with energy, consumer staple, consumer discretionary, and financials subsectors being notable gainers. Around late afternoon, the benchmark S&P/ASX200 index added 11.41 points, or 0.2%, at 6,139.80 points, while the broader All Ordinaries inclined 13.96 points, or 0.22%, at 6,223.00.

Overnight on Wall Street, the Dow Jones Industrial Average slipped 33.97 points to close at 26,057.98 while the S&P 500 shed 0.1% to finish its trading day at 2,793.49. The Nasdaq Composite closed fractionally lower at 7,549.30. The moves stateside came amid disappointing earnings, mixed U.S. economic data as well as a testimony from Fed Chair Jerome Powell.

The Fed is in "no rush to make a judgment" about further changes to interest rates, Powell told US lawmakers on Tuesday as he spelled out the central bank's approach to an economy that is likely slowing. The US economy expanded by an estimated 3% in 2018 and official US interest rates are set at a range of 2.25 to 2.50%. In two hours of testimony to the Senate Banking Committee, Powell elaborated on the "conflicting signals" the Fed has tried to decipher in recent weeks, including disappointing data on retail sales and other aspects of the economy that contrast with steady hiring, wage growth, and ongoing low unemployment.

Mr Powell warned of slowing growth overseas that may hurt the US economy and said the Fed will be patient when deciding whether or not to raise interest rates again. He warned that uncertainty remained over issues such as Brexit and the US-China trade dispute and he said the Fed would carefully monitor developments. "We have the makings of a good outlook and our (rate-setting) committee is really monitoring the crosscurrents, the risks, and for now we are going to be patient with our policy and allow things to take time to clarify," Mr Powell said. The US central bank increased interest rates four times last year.

More evidence of the hot and cold economy was in evidence overnight, with weaker-than-expected US housing data and a rosy consumer confidence report.US homebuilding tumbled to a more than two-year low in December as construction of both single and multi-family housing declined, which overshadowed the rebound in consumer confidence in February after three months of declines.

Investors will be keeping an eye on the US-North Korean summit, scheduled to kickoff in Hanoi later on Wednesday. US President Donald Trump and North Korean leader Kim Jong Un were due to meet for their second summit, betting that their personal relationship can break a stalemate over the North's nuclear weapons and end more than 70 years of hostility. Experts say, however, they don't have high expectations from this week's meeting, set to take place in Hanoi on Wednesday and Thursday.

China and Europe are particular areas of concern, and the Fed is watching how Brexit negotiations and trade talks play out. The implicit message would appear to be that if the US and China can achieve a trade deal and global growth and markets rebound, then the Fed might again consider rate hikes.

Energy stocks inclined, as crude oil futures rose slightly on Tuesday after news that OPEC planned to continue production cuts despite Trump criticizing the producer group for rising crude prices a day earlier. US crude futures stood at $56.02 per barrel, up 0.9%, in early Asian trade.

Shares of major materials and resources were up. BHP was up 0.67% and Rio Tinto added 0.41%.

The banking sector was up, with major banks ANZ, NAB, Commonwealth and Westpac were up between 0.59% and 0.94%.

In company news, Bellamy's Australia (BAL) shares declined 3% after the company reported a 63% fall in first-half net profit to A$8.4 million and warned of a worse than expected result for the full year. Revenue fell 26% to A$130 million. BAL now expects FY19 revenue to come in between A$275-300 million reflecting zero Chinese-label sales during the half.

Online job search company Seek (SEK) has posted a 5% decline in first-half profit to A$99.3 million hurt by weaker results in its Latin American division. However, total revenue rose 21% to A$757.2 million, driven by strength in Australia, NZ and China. SEK shares were up 7.2% to A$18.58.

OzMinerals (OZL) has reported a 3.8% dip in FY18 net profit to A$222.4 million. The result was impacted by higher depreciation and one-off charges. OZL shares were down 0.8% to A$10.63.

Bega Cheese was up 0.3% after reporting a 74% dive in first-half profit and announcing the immediate closure of its manufacturing facility in Coburg.

CURRENCY: The Australian dollar was little changed against the U.S. dollar on Wednesday. The Australian dollar was at $0.7182 after seeing lows below $0.715 in the previous session.

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