Market rises on RBA rate cut: Afternoon market insights

The Australian market rose for most of the day in anticipation of a rate cut by the RBA and investors were not disappointed when the central bank announced a bigger than expected cut of 50 basis points, sending the share market higher.

Reserve Bank Governor Glenn Stevens said the decision was based on information received over the past few months that suggests economic conditions have been somewhat weaker than expected, while inflation has moderated.

“Growth in the world economy slowed in the second half of 2011 and is likely to continue at a below trend pace this year,” Stevens said.

“A deep downturn is not occurring at this stage however and in fact some forecasters have recently revised upwards their global growth outlook.

“Market sentiment remains skittish however and the tasks of putting European banks and sovereigns onto a sound footing for the longer term and of improving Europe’s growth prospects remain large, hence Europe will remain a potential source of adverse shocks for some time yet.

“In Australia output growth was somewhat below trend over the past year, notwithstanding that growth in domestic demand ran at its fastest pace for four years.

“Output growth was affected in part by temporary factors but also by the persistently high exchange rate. Considerable structural change is also occurring in the economy.”

All industry sectors rose today.

The S&P/ASX200 was up 0.85% to 4434.60 and the All Ordinaries Index was up 0.77% to 4501.70 at 3pm.

The day’s winners

Saracen Mineral Holdings (ASX: SAR) was up 6.03% to $0.615 at 3pm. Saracen is an Australian mid-tier gold producer with assets 120km north-east of Kalgoorlie in Western Australia and with around 200 granted tenements and applications pending spread over 2,500 square kilometres. Last week it released a report to the ASX saying it had produced 10,968 ounces of gold in March.

One Steel (ASX: OST), which rose 3.86% to $1.37 at 3pm, will alter its name to Arrium at an EGM on 8 May as it changes to a mining and materials group from a steel producer.

The day’s losers

Ramelius Resources (ASX: RMS) had fallen 20.52% to $0.612 by 3pm. Ramelius is an Australian gold producer. The company has assets all over Australia including the Wattle Dam Gold Mine 70km south of Kalgoorlie and around 25km south-west of Kambalda in WA’s eastern goldfields.

Wotif.com (ASX: WTF) was down 5.43% to $4.18 at 3pm. Wotif is a website that buys hotel room nights in bulk at a discount and sells them to travel consumers all over the world.

Sector movers

The strongest sector was the S&P/ASX 200 Energy (Sector) index which was up 1.80% to 14367.60.

The weakest sector was the All Ordinaries Gold (Sub-Industry) which only rose 0.57% to 5733.2 at 3pm.

Currency

The Australian dollar dropped more than half a US cent after the Reserve Bank of Australia cut the official cash rate by a substantial 50 basis points. One Australian dollar was buying $US1.0319 at 3pm.

Asia

Japan’s stocks slid the most in two weeks as the predicted company profits were down on analyst estimates. China, Hong Kong, India, South Korea and Singapore were among markets closed today for a holiday. The MSCI Asia Pacific Index slid for a second month in April, losing 1%.

Japan’s NIKKEI 225 was down 1.55% or 147.83 points to 9373.06 at 3.30pm AEST.

Sony, Japan’s biggest consumer electronics exporter, which gets more than 40% of its sales from Europe and the US, lost 3%.

Chip-equipment maker Tokyo Electron tumbled 8.9% after it reported profit fell more than expected.

Sharp, Japan’s largest producer of liquid-crystal displays, sank 8.5% with the maker of Aquos televisions saying it will probably post a 30 billion yen loss for the year.

“The worst catalyst is the strengthening yen. Investors can’t get optimistic about the Japanese economy,” Koji Toda, chief fund manager at Resona Bank in Tokyo, a unit of Japan’s fifth-biggest lender by market value, told Bloomberg.

“The number of companies where earnings are improving as much as investor expectations is relatively small.”

The S&P/ASX200 was up 0.77% to 4430.50. The All Ordinaries Index was also up 0.69% to 4498.20.