Australia shares up, rate talk dogs dollar: Wednesday 23 September

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Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

 

Australian shares have roared back strongly after four consecutive days of falls, but the Aussie dollar tumbled, dogged by talk that the Reserve Bank could ease monetary policy further next month.

The S&P/ASX200 benchmark index closed 139.8 points higher, or 2.4 per cent, to 5923.9 on Wednesday.

The All Ordinaries index rose 137.8 points, or 2.3 per cent, to 6111.3.

Meanwhile, the Aussie dollar sank like a stone after breaching anticipated support at 71.50 US cents early in the day, hitting its lowest level since early August at 71.16 US cents.

At 1615 AEST the currency was 71.19 US cents, compared with $72.09 US cents late on Tuesday.

Analysts expect the Reserve Bank could cut the cash rate to 0.10 per cent as early as the next board meeting on October 6, coinciding with the release of the federal budget.

“It will be a “Team Australia” day of co-ordinated policy stimulus,” BetaShares ETFs chief economist David Bassanese said.

Local shares were a sea of green across all sectors following a more positive performance on Wall Street overnight, where its major indices were up as much as 1.7 per cent.

The local share market had dropped to a three-month low in recent days on global worries over the COVID-19 second wave and in the run-up to US presidential election.

BHP was up 1.3 per cent at $37.15 and Rio Tinto rose 0.5 per cent to $97.50 as the market found a new lease of support.

Among the big four banks, Commonwealth was 1.9 per cent higher at $64.27, ANZ rose 2.4 per cent to $16.85, NAB was up 2.9 per cent to $17.12 and Westpac increased 2.1 per cent to $16.39.

Elsewhere, Qantas was 4.5 per cent higher at $3.94 after the airline announced it is ending its 30-year sponsorship with Rugby Australia after a review of its major sporting sponsorship deals.

The Aussie dollar has been on the backfoot since a speech by deputy Reserve Bank governor Guy Debelle on Tuesday indicated the central bank is ready to use a suite of measures to support the economy if needed.

Mr Debelle had also suggested the Reserve Bank is a little uncomfortable with the level of the Australian dollar, saying a lower exchange rate would “definitely be beneficial” for the Australian economy.

“The global central bank currency war – where each is competing to have a cheap currency via very low interest rates – continues, and the RBA likely feels it has no choice but to enter the fray,” Mr Bassanese said.

Interest rate futures are implying a cash rate of just 0.075 per cent.

Meanwhile, retail spending fell across the nation in August, with Victoria recording a massive 12.6 per cent drop as the state’s COVID-19 restrictions hit non-essential retail businesses.

Australian Bureau of Statistics preliminary retail trade figures for the month showed national turnover fell by 4.2 per cent compared to July.

Outside of Victoria, retail activity fell 1.5 per cent.

At the same time, demand for workers grew nationally for a fourth month in a row but declined again in Victoria.

Department of Education, Skills and Employment data showed jobs ads posted on the internet in August rose 1.3 per cent but were still down 19.5 per cent compared with a year earlier.

All jurisdictions, except Victoria, recorded gains in recruitment activity during the month. In Victoria, job ads fell by 7.5 per cent – its second monthly decline.

ON THE ASX

* The S&P/ASX200 benchmark index closed up 139.8 points, or 2.4 per cent, at 5923.9 points on Wednesday

* The All Ordinaries index finished 137.8 points higher, or 2.3 per cent, at 6111.3

* At 1710 AEST, the SPI200 futures index was trading two points higher, or 0.03 per cent, at 5907 points.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 71.19 US cents, from 72.09 US cents on Tuesday

* 74,78 Japanese yen, from 76.35 yen

* 60.96 Euro cents, from 61.32 cents

* 56.10 British pence, 56.33 pence

* 107.85 NZ cents, from 108.19 cents

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