ASX in the red as RBA cuts rates

As expected the RBA cut its official cash rate to 1.5% and its pleasing to see the RBA take a proactive approach. The central bank offering little in terms of the future direction of their policy but given the current issues we have with inflation, wage growth, slowing economic growth, end of the mining boom, lack of employment growth, it seems inevitable that this will not the last cut we will see in the short term.

Looking ahead a busy week for the markets we have retail sales data out on Thursday, and the RBA’s statement on monetary policy out on Friday. We have the Bank of England with a rates decision on Thursday while in the U.S all eyes on the jobs data which anticipates 185,000 jobs being added to the economy.

Across the market, the energy sector taking another battering with Crude Oil volatility again the catalyst. After a big bounce from short covering yesterday not a pretty picture today with Beach Energy (-5.26%), Caltex (-3.23%), Origin (-3.68%), Oil Search (-3.68%), Santos (-5.01%) and Woodside (-2.37%) all in the red. Given the market calls in recent days, look for this period of volatility to continue.

Resource stocks also under pressure despite a rally in Iron Ore overnight. After a flat open, the sector being sold off into the afternoon with BHP (-1.53%), Fortescue (-0.67%) and Rio Tinto (-0.34%) all in the red.

The big banks seeing a volatile session being the main lag for most of the day. We did actually see all 4 make a big bounce higher following the RBA rates decision before seeing some selling pressure just before 3pm. ANZ (-0.35%), CBA (-0.56%), NAB (-0.69%) and Westpac (-1.09%) all in the red. Now rates are this low, will we could see the yield chasers return but they should be careful with the potential for earnings and dividend downgrade and regulatory issues ahead.