Australian Banks Defy Latest RBA Rate Cut, Stocks Up

Marcus Jacob
01 May, 2012
New York City

Australian stocks gained after the Reserve Bank of Australia cut rates by 50 basis points. The market rally was short lived after large banks failed to follow the move. Rupert Murdoch was deemed unfit to run UK newspaper business. Woodside sold a stake in its $2 billion Browse LNG field.

[R]8:00 PM Sydney – Australian stocks rallied after the Reserve Bank of Australia cut rates by 50 basis points. The market rally was short lived and trimmed gains after large banks failed to follow the move. Rupert Murdoch was deemed unfit to run UK newspaper business. Woodside sold a stake in its $2 billion Browse LNG field.[/R]

Stocks in Australia gained after the Reserve Bank cut its benchmark rate by 50 basis points. The rate cut of at least 25 basis points was widely anticipated by the market however the market rally quickly faded and shifted focus on the weak economic environment.

The RBA cut the reference rate to 3.75% from 4.25% but none of the big banks followed the central bank decision. The large banks have not followed the RBA rate cut moves for more than two years and increasingly used the argument that the cost of acquiring deposits. And yet, large banks find ways to pay outsized salaries to bank executives.

The larger than expected rate cut may force banks lower mortgage rates by at least 35 basis points. After the close, The Bank of Queensland said it will trim its standard variable home mortgage rate by 35 basis points to 7.11%.

The ASX 200 index gained 32.90 to 4,429.50 and All Ordinaries index increased 30.10 to 4,497.31.

Stock Movers

News Corp was in focus and after the close UK parliamentary committee deemed Rupert Murdoch as “not a fit person” to run UK media conglomerate. The committee also focused on the misleading and largely untrue testimony of Les Hinton who was responsible for the newspaper operations at the time of the phone hacking scandal.

The disgraced Hinton was forced to resign as the publisher of the Wall Street Journal which he led for four years during which the newspaper steadily lost its influence and lost its core group of key investigative journalists.

Retailers and construction industry linked stocks rose after the RBA lowered its key rate by 50 basis points.

David Jones Limited increased 5 cents to $2.54, Harvey Norman Holdings closed up 3 cents at $2.05 and Woolworths soared 23 cents to $26.17. Myer gained 7 cents to $2.42 and Kathmandu added 2 cent to $1.33. Billabong International Limited unchanged to $2.64.

The maker of building materials Boral increased 3.4% and the cement maker Adelaide Brighton increased 2%.

Online travel agency Wotif dropped 5% to $4.17 after the company guided annual earnings may fall as much as 5% below analysts’ consensus estimates.

BHP Billiton closed up 42 cents to $35.97 and Rio Tinto dropped 56 cents to $65.79.

Lynas Corporation Limited fell 2 cents to $1.10 and Iluka Resources decreased 11 cents to $16.89. Newcrest Mining gained 12 cents to $26.42 and Kingsgate rose 2 cents to $6.22.

Ramelius plunged 25% to 58 cents after the company released that data that indicated that mining may come to a halt in 2013 at its main gold mine Wattle Dam.

Oil Search Limited increased 8 cents to $7.43 and Santos Limited added 1 cent to $14.03.

Woodside Petroleum surged $1.28 to $36.20 after the natural gas explorer sold a stake in the proposed Browse Basin LNG field in Western Australia to a consortium of Mitsubishi Corp and Mitsui.

Senex Energy declined 5% to $1.075 after the UK based BG Group sold its 8% stake in the company for $75 million or $1.02 a share.

Westpac Banking Corporation increased 10 cents to $22.83 and Commonwealth Bank of Australia closed up 88 cents at $52.85. Bank of Queensland slumped 20 cents to $7.26. ANZ gained 8 cents to $23.99.

National Australia Bank fell 2 cents to $25.21 after the bank said it will cut a staff of 1,400 in the U.K. and take a one-time charge of $740 million as the banking sector reels from the years of reckless speculation and trading.

Stockland edged up 2 cents to $3.12.

Qantas added 2 cents to $1.65, Virgin Australia edged down 1 cent to 39 cents and Flight Centre advanced 11 cents to $21.23.

QR National fell 1 cent to $3.63.