Australia Market gains as RBA plays up recovery prospects

The Australian share market finished modest higher for second straight session on Tuesday, 02 June 2020, as investor sentiments was lifted by tracking a positive lead from Wall Street overnight and hopes of a speedy domestic economic recovery after the Reserve Bank of Australia (RBA) reiterated that the impact from the coronavirus crisis could be less damaging than initially feared. Meanwhile, a significant decline in new infections, earlier-than-expected easing of restrictions and signs that hours worked had stabilised in early May also helped lift investor sentiment. However, market gains were somewhat capped due to uncertainty caused by mass protests in the United States against police brutality and diplomatic tension between Washington and Beijing over civil liberties in Hong Kong.

At closing bell, the benchmark S&P/ASX200 index advanced 15.94 points, or 0.27%, to 5835.09. The broader All Ordinaries added 21.69 points, or 0.37%, to 5,960.06.

 

Mining stocks gave back some of Monday's outsized gains, with BHP, Newcrest (NCM), Saracen (SAR) and Evolution (EVN) all slipping. BHP closed 0.84% lower at A$35.41 and Rio Tinto dropped 0.27% to A$96.97. Fortescue Metals, despite setting a new record high A$14.88 earlier in the session, drooped 0.41% to close at A$14.73.

The financials finished 0.2% higher, with Commonwealth Bank closed 0.2% higher at A$64.03, while rivals NAB, Westpac, and ANZ shed between 0.2 per accent and 0.9%. Macquarie Group outperformed with a 2.6% climb to A$113.31 after raised more than expected from its capital bank notes offer.

Zip Co (Z1P) surged by 38% on Tuesday. The company is raising ~$200m to buy the remaining shares in an American buy-nowpay-later provider called Quadpay. Quadpay has around 1.5 million customers in the US and 3500 merchants using its platform. This follows strong growth by competitor Afterpay (APT) in the US market.

ECONOMIC NEWS: RBA Leaves Key Rates Unchanged- The board of Reserve Bank of Australia, governed by Philip Lowe, decided to maintain cash rate and the targeted yield on three-year government bonds of 25 basis points, at the monetary policy meeting. Policymakers said this accommodative approach will be maintained as long as it is required. The RBA had reduced the key interest rate to the current record low of 0.25% at the March meeting. Also in March, the bank had introduced asset purchase programme to combat the downturn caused by the pandemic. The board on Tuesday said it will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3% target band. The bank observed that the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the coronavirus pandemic is likely to have long-lasting effects on the economy.

CURRENCY NEWS: The Aussie dollar gained 1.3% against the US greenback to a four-month high of US67.53c.

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