Australia Market extends gain on rate cut hopes

Headline indices of the Australian financial market closed slight higher on Thursday, 07 March 2019, on growing expectation of policy support from the government after latest official data showed a marginal growth in January retail sales and weaker than expected GDP figures. However, market gains were limited amid return of global growth concerns after the Organisation for Economic Co-operation & Development (OECD) cut its forecasts for the global economy in 2019 and 2020, following on from previous downgrades in November, as it warned that trade disputes and economic uncertainty over Brexit would hit world commerce and businesses. Barring materials and technology, all ASX sectors were higher, with shares in with utilities, property trusts, consumer staples, and consumer discretionary subsectors being notable gainers. At closing bell, the benchmark S&P/ASX200 index rose 18.27 points, or 0.29%, at 6,263.89 points, while the broader All Ordinaries added 17.45 points, or 0.28%, at 6,344.21.

Market received a boost from growing speculation that the Reserve Bank of Australia (RBA) will cut key interest rates this year to stimulate the economy after data on Thursday showed only marginal growth in January retail sales. The weak consumer reading came a day after news that the economy had lost momentum in the second half of last year.

 

Meanwhile, data released in early hours showed that U.S. goods trade deficit surged to a record high in 2018 as strong demand fueled by lower taxes pulled in imports, despite the Trump administration's "America First" policies, including tariffs aimed at shrinking the trade gap. This comes at a time when China's exports probably contracted in February after a surprise bounce in January, while imports fell for a third straight month, a Reuters poll showed, highlighting deepening concerns of a long-drawn trade spat between the world's largest economies.

Financial stocks gained, with National Australia Bank up 0.8%, after named interim Chief Executive Philip Chronican as its new chairman following strong criticism from a financial sector inquiry into widespread misconduct prompted his predecessor to resign.

Materials and resources stocks declined, as number of sector heavyweights traded ex-dividend. BHP lost 0.7%, while Rio Tinto slumped 4.8%.

Tech stocks also fell on Thursday following a similar slide in Wall Street on Wednesday, which saw the Nasdaq Composite fall 0.9%. Altium fell 2%, Appen slid 2.2% and Wisetech Global declined 2.3%.

Afterpay Touch slipped 2.5% after the company announced after the market closed on Wednesday that independent non-executive director Clifford Rosenberg sold 150,000 of his shares in the buy now pay later provider, earning close to $3 million.

Telstra shares closed 1.6% higher. Research from JPMorgan showed the telco increased its market share in the first half of the 2019 financial year, taking its share of the postpaid mobile market to nearly 50%. The company's low-cost mobile brand Belong accounted for half of the telco's new accounts.

Super Retail Group's shares advanced 4.8% after the company hired retail veteran Gary Williams as managing director of sports retailing, succeeding Erica Berchtold, who resigned in October. Mr Williams will take charge of Rebel Sport, the company's second-largest business and has previously worked for Myer, David Jones, Westfield and Reebok.

ECONOMIC NEWS: The Australian Bureau of Statistics said that Australia had a seasonally adjusted merchandise trade surplus of A$4.549 billion in January, up A$780 million from the upwardly revised A$3.769 billion surplus in December. Exports were up 5.0% on month or A$1.901 billion to A$39.937 billion in January from A$38.036 billion in the previous month. Imports picked up 3.0% or A$1.121 billion to A$35.388 billion from A$34.267 billion a month earlier.

The Australian Bureau of Statistics also said that the total value of retail sales in Australia was up a seasonally adjusted 0.1% on month in January, coming in at A$27.018 billion, following the 0.4% decline in December.

CURRENCY: The Australian dollar was little changed against the U.S. dollar on Wednesday on bets the Royal Bank of Australia will likely cut interest rates this year. The Australian dollar was quoted at $0.7032, up from $0.7033 on Wednesday.

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