The initial plunge for the market was in response to the latest economic readings from China at the weekend, which revealed that activity in the manufacturing and services sectors had effectively ground to a halt in February. The Chinese manufacturing Purchasing Managers Index (PMI) slumped from 50.0pts in January to a record low of 35.7pts in February. The result for February is below the low point reached during the GFC. The non-manufacturing (services) PMI was even weaker. It slumped from 54.1pts in January to 29.6pts in February. The bottom line is the Chinese economy contracted significantly in February
One of the factors that allowed today's consolidation was the prospect for synchronised rate cuts from global central banks in coming weeks as authorities globally mobilise initiatives to insulate economies from the economic shock associated with the Coronavirus. In an uncharacteristic, but sensible move, the chair of the US Federal Reserve, Jay Powell, issued a short statement Saturday morning Sydney time to acknowledge the risks the coronavirus poses to the US economy. He said the Federal Open Market Committee (FOMC) will use its policy tools to support the economy. Markets stabilised after the release of chair Powell's statement. Market pricing for cuts to the Funds rate is aggressive with almost 1% of rate cuts priced by the end of the year.The RBA meeting tomorrow is now expected to deliver an interest rate cut in response to the growing concerns around the Coronavirus (COVID 19) and the impact on the Australian economy. The market's pricing for a rate cut rose swiftly following much the weaker than expected Chinese PMI data.
Energy, Information Technology and Consumer Staples were noteworthy improvers against the weaker backdrop. Financials were the main weight on the Index led by a 2.5% for the NAB, regional lenders fell - Bank of Queensland (BOQ) fell 15 cents or 2% to $9.01 and Bendigo and Adelaide Bank (BEN) closed at $9.01 for a loss of 18 cents of 1.9%. Property Stocks were also out of favour; Charter Hall Group (CHC) closed with a loss of 2.4% or 30 cents at $12.18, BWP Trust (BWP) fell 1.3% or 5 cents to $3.74
ECONOMIC NEWS: Australia AiG Performance Of Manufacturing Index Contracts To 44.3 In February -- Australia manufacturing sector continued to contract in February, and at a faster rate, the latest survey from the Australian Industry Group revealed on Monday with a seasonally adjusted Performance of Manufacturing Index score of 44.3. That's down from 45.4 in January, and it moves further beneath the boom-or bust line of 50 that separates expansion from contraction. This marked four consecutive months of contraction in Australian manufacturing for the first time since 2014 and was the lowest monthly result in almost five years.
CURRENCY & COMMODITY NEWS: The Australian dollar slid against greenback, amid growing concerns about the spread of the pneumonia-causing virus. The Australian dollar was at $0.653 after dropping from levels above $0.6555 last week.
In Commodity news: Crude oil prices surged in the afternoon of Asian trading hours, with international benchmark Brent crude futures up 3.08% to $51.20 per barrel. The U.S. crude futures contract gained 2.73% to $45.98 per barrel.
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