Australia Market falls after the Fed pushed back rate cut expectations

The Australian share market closed down on Thursday, 02 May 2019, as majority of the sectors slipped, with banks and miners being the main drag on the broader market on following fall in Wall Street overnight after signs that the US Federal Reserve may not be considering rate cuts at the moment. Market losses were, however, capped after reports that the U.S. and China could announce a trade deal as soon as next Friday. At closing bell, the benchmark S&P/ASX200 index declined 37.49 points, or 0.6%, at 6,338.40 points, while the broader All Ordinaries dropped 36.48 points, or 0.56%, at 6,430.

The U.S. Federal Reserve's pushed back on market expectations that its next move would be a rate cut in overnight monetary policy meeting. Federal Reserve officials voted to hold interest rates steady Wednesday, while Fed Chairman Jerome Powell said in a news conference that recent low inflationary pressures may only be transitory. That dashed speculation the central bank was entertaining the idea of a rate cut because of tame inflation. Data released earlier this week showed the US core personal consumption expenditure price index remained unchanged in March and was up 1.6% year over year below the Fed's 2% target. U.S. President Donald Trump had urged the Fed to cut rates by 1%age point this week because of low inflation.

 

Shares of financials declined after mixed earnings results from major lenders. National Australia Bank (NAB) announced its first half results this morning with cash earnings of $2.95 billion, 7% higher on the prior year and mostly in line with expectations. Most notably, NAB decided to cut its interim dividend by 16% to $0.83/share. Among the big four banks, Westpac closed down 2.6%, Commonwealth down 0.9%, ANZ down 2.4%, and NAB down 0.3%.

AMP shares have rebounded after the beleaguered wealth manager survived a potential board spill over executive pay. AMP shares dropped more than 5% on Thursday morning after the company said it had experienced net cash outflows of A$1.8 billion in the first quarter. But they started bouncing back in the afternoon, after 89% of shareholders voted in favour of the wealth manager's remuneration report, sparing it a second strike.

Materials shares declined as investors booked profits, with mining behemoth BHP Group, Fortescue Metals (FMG) and Rio Tinto (RIO) were down between 1% and 2%.

Lithium and rare earths miner, Kidman Resources surged 42% after receiving a takeover offer from Wesfarmers for A$1.90/share, valuing the transaction at A$776 million.

CURRENCY: The Australian dollar was down against the U.S. dollar on Thursday after the Federal Reserve held interest rates steady and indicated there would be no change either way any time soon.. The Australian dollar was quoted at $0.7016, down from $0.7049 on Wednesday.

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