Afternoon Report / RBA holds steady on Cup day

By Market Matters 05 November 19

RBA holds steady on Cup day

WHAT MATTERED TODAY

A particularly quiet day of trade today with volumes noticeably lighter ahead of the race this afternoon. The market tracked higher early one before giving all its hard work back by midday. The afternoon was a little better with the top 200 managing to hold on to the bulk of a 35pts rally from the lunch time low. The focus today was split between Westpac (WBC) and the RBA today. Westpac was back trading after a day’s hiatus post a soft result and subsequent capital raise to shore up the balance sheet. The bank managed to get the biggest deal of the year away with ease with plenty of insto names keen to get their hands on stock at a discount. WBC shares were hit hard early, off -5.09% just after the open, before staging a nice recovery to close down -2.55% at $27.17. The end result being shares are around 2.5% above the transaction price adjusted for the 80c dividend and franking.

The RBA the other focus today with Philip Lowe electing to keep rates on hold as was widely tipped – no change was paying shorter odds than Melbourne Cup winner Vow and Declare. Still, the Aussie dollar rallied on the news, currently trading marginally above the 69c handle against the US Dollar. The comments from the central bank suggested they were happy with where rates were at this point in the cycle with the bank happy for unemployment to keep slightly above 5% while growth is expected to pick up in 2021. Rate futures edged higher on the call which helped support the currency – not something the RBA wants if it is trying to boost inflation. ‘Monitor’ was the key term here implying the bank is not in any hurry. A rate cut is priced in for the first quarter next year.

AUD VS USD

Energy and resource names were broadly higher – energy the best sector in the market again as the commodity tracks higher. Communications were the worst off but the bulk of the work to the downside was done by heavyweight Telstra (TLS) which was only -0.57% lower today. Staples and utilities – bond like sectors – were off on the more upbeat RBA commentary and risk on attitude from the market.

Overall, the ASX 200 closed 10pts/+0.15% higher today to 6697, Dow Futures are trading up +58pts / +0.21%

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE;

Broker moves;

  • Iluka Cut to Neutral at Macquarie; PT A$9.30
  • Seven Group Cut to Sell at Morningstar
  • Incitec Cut to Sell at Morningstar
  • Westpac Rated New Underperform at Jefferies; PT A$26.11
  • James Hardie GDRs Rated New Underperform at CLSA
  • Coats Rated New Buy at Stifel; PT 85 pence
  • Zip Co. Cut to Hold at Morgans Financial Limited; PT A$3.56
  • Panoramic Resources Cut to Neutral at Hartleys Ltd

OUR CALLS

No changes today.

Major Movers Today

Have a great night

Harry & the Market Matters Team

Disclosure

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