With the US market up ~5% overnight it’s safe to say a better effort from the Australian market was expected today, however a 25bp cut from the RBA and subsequent sell-off in the banking sector dragged the market down from early highs, closing up just +44pts , nearly 90pts from the days peak. The banks succumb to political pressure and passed on the full cut which puts pressure on their net interest margins - when banks are sold the market struggles and that was the clear takeaway from today’s pretty dismal effort.

IT stocks were best on ground today enjoying the overseas strength, Xero (XRO) led the sector higher followed by Afterpay (APT) - money flowing into the sector leaders, while it was the banks that put a lid on the optimism. The market put in a high of +132pts at lunchtime but couldn’t go on with it – a close up just +44pts shows how nervous the market is, not surprising given that just 7 days ago we peaked at 7197, a drop to Mondays low of more than 13%.

Asian stocks did okay although they didn’t embrace the US’s optimism overnight. US Futures were stronger early however Reuters reported that the G-7’s response to combat the coronavirus was unlikely to call for coordinated interest rate cuts nor specific government spending. Clearly the market is becoming fixated with the policy response, and whispers here casting some doubt

Overall, the ASX 200 added +44pts / +0.69% today to close at 6435. Dow Futures are trading down -41pts/-0.15%

Volume again massive on the ASX , as was the case yesterday (and last week). North of $11bn

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE

Today’s rate cut: The RBA cut rates today by 0.25% taking the benchmark to a record low of 0.50%. Bond yields actually rose after the announcement and so to did the Aussie Dollar showing the move was already well and truly priced in + there was a portion of the mkt expecting more.

Aussie Dollar Chart

Banks: the chart of CBA shows how the banks reacted to today’s cut – not well. Some aggressive selling played out and they all closed on their lows. CBA back below $80.

Commonwealth Bank (CBA) Chart

BROKER MOVES

  • Accent Group Cut to Hold at Morgans Financial Limited
  • JB Hi-Fi Raised to Add at Morgans Financial Limited; PT A$40.66
  • Domino’s Pizza Raised to Add at Morgans Financial Limited; PT A$60.30
  • Ansell Cut to Underperform at Macquarie; PT A$27.50
  • Cochlear Raised to Overweight at Wilsons; PT A$225
  • Autosports Raised to Overweight at Wilsons; PT A$1.57
  • Appen Raised to Buy at Bell Potter; PT A$26.50
  • GWA Group Raised to Hold at Morningstar
  • GPT Group Raised to Hold at Morningstar
  • GPT Group Rated New Buy at Jefferies; PT A$6.40
  • Credit Corp Raised to Hold at Morningstar
  • Flight Centre Raised to Buy at Morningstar
  • Brickworks Raised to Hold at Morningstar
  • Nine Entertainment Raised to Buy at Morningstar
  • APA Group Raised to Outperform at RBC; PT A$12
  • Sandfire Resources Rated New Buy at Jefferies; PT A$5
  • OZ Minerals Rated New Buy at Jefferies; PT A$10.90
  • Pro Medicus Raised to Outperform at RBC; PT A$30
  • Amcor GDRs Raised to Outperform at Credit Suisse; PT A$16.25
  • Coles Group Raised to Outperform at Credit Suisse; PT A$17.80
  • Aristocrat Raised to Outperform at Credit Suisse; PT A$35
  • Super Retail Raised to Outperform at Credit Suisse; PT A$9.94
  • InvoCare Cut to Sell at Moelis & Company; PT A$13.43

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