RBA’s Decision to Keep Rate on Ice Trigger Stock Sell Off

RBA’s Decision to Keep Rate on Ice Trigger Stock Sell Off

Aussie shares gave away all of Monday’s gains following soft overnight leads. Weaker than expected manufacturing numbers from China and US remain front of mind for local investors with Tuesday trading mostly muted.

Crude’s temperamental swings continues to wreak havoc amongst energy-based stocks. Tuesday’s session saw the energy sector shed 3.6% collectively. Origin Energy took off almost 3.5% with Woodside Petroleum enduring a less grim fate, falling almost 3.0%.

Surprisingly, materials were not crucified any more than the 2.4% sell off the sector suffered. BHP’s downgrade by Standard and Poor from A+ to A, saw stakeholders breath a unanimous sigh of relief. The downgrade all but does away with the promise of a progressive dividend.

As expected, the RBA kept rates on ice at 2% for the 8th consecutive month. The local bourse registered the news with a 10 point slide following the announcement. The inverse was true for the local dollar. The AUD spiked immediately, reaching intra-day highs at USD0.712 to resume trading back below USD0.71 shortly after.

In afternoon trade, the post RBA-announcement slide experienced on Aussie equities prompted a 30 point slip. The local index re-entered sub-5000 territory with most major sectors dipping into the red, with the exception of Gold and Telcos. With VIX closing sub-20 overnight for the first time in a month, it suggests calmness may have momentarily returned to the markets. Investors battle whether the bargain-buys have been bought and brace for the unknown and undeniably the return of volatility.

ENDS

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