Aussie stocks remained steady today as the Reserve Bank of Australia held the cash rate in place at its record low of 0.25 per cent.
While expectations of another rate cut were low despite the continued COVID-19 economic devastation, investors were eager to get a glimpse of the RBA’s thinking behind how to manage this unprecedented crisis.
Governor Philip Lowe’s after-meeting report was mixed.
He said while the global economy continues to experience a severe downturn from the coronavirus — with unemployment still rising sharply — containment measures have been effective in reducing infection rates in several countries.
“If this continues, a recovery in the global economy will start later this year, supported by both the large fiscal packages and the significant easing in monetary policies,” the Governor’s report said.
“Globally, financial markets are working more effectively than they were a month ago, although conditions have not completely normalised.”
However, the RBA predicted unemployment will peak at a heavy 10 per cent over the coming months. In its baseline scenario, the Reserve Bank said unemployment will still be at seven per cent by the end of 2021. However, a lower unemployment rate is possible if companies opt to lower employees’ hours instead of standing them down.
Still, Australian investors seemed mostly pleased with the RBA outlook, with this morning’s rebound staying strong. The ASX 200 climbed 1.64 per cent today to close at 5407.10 points. This places the benchmark index just over 100 points down from Thursday’s peak before last week’s brutal Friday sell-off.
It was the energy sector that spearheaded today’s winning run. Another recovery in oil prices saw the sector close 4.17 per cent higher. Woodside gained 4.44 per cent, Santos five per cent, and Origin Energy 5.51 per cent.
Resources stocks added their own weight to the gains as our big iron ore players each closed green. BHP gained 2.71 per cent, Fortescue 2.22 per cent, and Rio Tinto 1.78 per cent.
And for once, gold stocks and the rest of the materials sectors were in sync. Newcrest Mining gained a healthy 3.62 per cent, Northern Star gained 2.65 per cent, and Evolution Mining gained 3.56 per cent.
Our big banks kept the finance sector steady, spurred on by NAB’s 3.22 per cent rise. Westpac gained 2.73 per cent, ANZ gained 1.86 per cent, and Commonwealth Bank once more brought up the rear once more with a 1.62 per cent incline.
Over to the east, it was mostly green across Asian markets. When the ASX closed shop for the day, the Asia Dow was trading 0.64 per cent higher, Hong Kong’s Hang Seng was 0.83 per cent higher, and the Shanghai Composite was 1.33 per cent higher. Only Japan’s Nikkei 225 index missed out, down by 2.84 per cent.
Meanwhile, the Australian dollar was higher today. Currently, one dollar buys 64.58 US cents, 51.78 pence, and 11.86 South African Rand.
Today’s ups and downs
In an era of capital raises, some companies are faring better than others. Food kit deliverer Marley Spoon (ASX:MMM) emerged as one of the COVID-19 winners over March when demand for its food boxes surged. Today, the company announced a $16.6 million oversubscribed share placement at a modest discount of just 2.8 per cent to its last closing price. Shares gained 11.11 per cent on the news, closing worth $1.20 each.
Meanwhile, hemp health product maker Elixinol Global (ASX:EXL) tapped investors for $11 million in a one-for-2.51 entitlement offer pricing shares at 20 cents each. This is a hefty 48.1 per cent discount to the company’s last closing price of 38.5 cents each. The company is currently in a trading halt slated to lift tomorrow, so investors will have to wait until then to react to today’s news.