Rate cut on the way – markets rally

James Gerrish

Market Matters

The Aussie market latched onto the ‘lower interest rate’ trade today, and rallied strongly after the employment data dropped at 11.30am – the buying intensified into the close. Unemployment came in at 5.2%, above the 5.0% expected by the market even though +28k jobs were added v expectations of 15k. Full time employment was weak offset by some strength in the part-time figure however overall, the numbers set up a rate cut in June. HSBC the latest to hit the airwaves this afternoon saying 

"Despite considerable reluctance to cut the cash rate, and a strong preference for a fiscal policy response, we now expect that the RBA will be forced to cut. With little reason to wait, we now expect the RBA to cut its cash rate in June by 25 basis points to 1.25 per cent, and to cut again in August (after the Q2 CPI) to 1.00 per cent." (source HSBC)

Today’s data the key

Source: Bloomberg

A short note this afternoon after one of those really busy days on the desk. Tomorrow morning I’ll look at interest rates but more importantly, stocks that have the capacity to pay special dividends from here.
Overall today, the ASX 200 added +43 points or +0.69% to 6327. Dow Futures are trading down -87pts / -0.34%.

ASX 200 Chart

ASX 200 Chart

Broker moves:

· Goodman Property Downgraded to Neutral at Macquarie; PT NZ$1.83

· Goodman Property Cut to Underperform at First NZ Capital

· South32 Rated New Overweight at Morgan Stanley; PT A$4.05

· St Barbara Cut to Underperform at Credit Suisse; PT A$2.72

· Ramelius Downgraded to Sector Perform at RBC; PT A$0.80

· Sydney Airport Cut to Hold at Morgans Financial; PT A$7.61

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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