The ASX received a boost after the release of the Reserve Bank of Australia’s Minutes of the Monetary Policy Meeting at 11:30am Tuesday morning. Australian shares retreated over 50 points in the opening hour of trading, but jumped back into positive territory after the RBA Minutes was released. However, the ASX retreated once again a little before noon. The Australian share market is back into negative territory around 1:40pm on Tuesday, although it has not fallen as much as the early morning selloff.
The RBA said it remains open to further interest rate cuts. Internationally, the central bank cited weakness across the Chinese economy. In particular, the Chinese property market is an area of concern for the RBA. The housing market directly influences industrial demand and on the finances of local governments that rely on infrastructure projects, the report said. The board cited the US economy as a point of strength in the international economy. Although GDP growth in the last quarter was less than ideal, it was most likely due to weather conditions. The US labour sector continues to show strength, in both employment figures and wage growth.
Domestically, the RBA believes there are some positive indicators, although they are mostly subdued. The property market has been stabilised by the interest rate cuts. However, this has mostly been limited to the Sydney and Melbourne markets. Business conditions in the mining sector were average and have picked up slightly. However, forward indicators suggest that both business confidence and non-mining investments are not achieving ideal numbers. Employment is expected to recover although at subdued levels. The Australian dollar has fallen to a one weak low after jumping past the US$0.80 mark. It is currently sitting at about US$0.7997 around 1:55pm AEST.
Author: Matthew Dibb
May 19, 2015
Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.