australian retail sales rise asx rises for the third day straight 903302014

A growing consensus forms that the RBA will cut rates in Q1 2015

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By :  ,  Financial Analyst

At its much-anticipated meeting yesterday the ECB disappointed by continuing to adopt a wait-and-watch attitude, lending credence to the belief that significant stimulus measures would only emanate in the first quarter of 2015, despite concerns of low inflation and growth.

Australian retail sales surprised on the upside, rising 0.4 per cent in October from September, versus analysts’ expectations of 0.1 per cent. Gains across department store sales, household goods and clothing led the rise in retail sales, according to Dow Jones Newswires. Retail sales growth has now returned to nearly the levels prevailing before the financial crisis, observed Citi economists Joshua Williamson and Paul Brennan, according to ABC. This positive retail data led to a surge in the retail sector with Woolworths Limited (ASX:WOW) (AU$31.27, +1.20 per cent) and Harvey Norman Holdings Limited (ASX:HVN) (AU$3.68, +0.55 per cent) being the winners.

Westpac was first out of the gate amongst Australia’s largest banks to predict that the country’s benchmark interest rate would be cut further next year, marking an about turn from the current view that interest rates would start to harden in 2015. Westpac chief economist Bill Evans feels the RBA would cut the cash rate successively at its meetings in February and March, following the weaker than expected GDP print earlier this week. “While we still expect rates to be on the rise in 2016 as the world economy gathers considerable momentum, we now expect the RBA to cut rates further in the early months of 2015 in an effort to bolster domestic demand and lower the AUD before evidence on the world economy becomes clearer around the middle of the year,” he said.

The Australian dollar continued its slide in overnight trade, reacting to the growing possibility of a rate cut and the strong US jobs data out yesterday. At 08:28 am AEDT the currency was trading at 83.82 US cents, down from its Thursday close of 83.97 cents. According to The Australian, the currency touched 83.56 cents at one point, the lowest since July 2010.

Iron ore, Australia’s key export commodity, surged higher in the latest trading session, with the benchmark spot Tianjin rate ending at US$71.10 per tonne, up 2.3 per cent compared to the previous close, said The Australian.

The ASX ended in the black for the third day on the trot, with solid gains seen in the mining and finance sectors. Westpac Banking Corp (ASX:WBC) (AU$33.40, +1.71 percent) and Australia and New Zealand Banking Group (ASX:ANZ) (AU$32.22, +1.42 per cent) were the biggest gainers amongst the large banks. Amongst miners, Newcrest Mining Limited (ASX:NCM) (AU$10.53, +5.3 per cent), Fortescue Metals Group Limited (ASX:FMG) (AU$2.77, +2.21 per cent), BHP Billiton Limited (ASX:BHP) (AU$30.89, +1.48 per cent) and Rio Tinto Limited (ASX:RIO) (AU$59.18, +2.07 per cent) put on a strong show. 

The S&P/ASX200 gained 47 points, up 0.9 per cent, to end the day at 5,368.8 while the All Ordinaries rose 44.2 points, or 0.8 per cent, to close at 5,345.4. For the S&P/ASX200, this was the biggest three-day rise in 12 months and followed on from the biggest two-day fall in two years, said The Australian Business Review.

Judging from the futures market, the ASX may open flat today. As at 09:02 am AEDT, the December 14 S&P/ASX200 futures contract was trading at 5,378.40, up just 0.01 per cent.

Find up to date information on the ASX at City Index.

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