Australian shares have extended early gains, buoyed by a bigger than expcted rate cut by the Reserve Bank. The dollar is under pressure, while bonds are rallying in reaction to the move.
It smacks of a knee-jerk reaction to one round of inflation data.
5.23pm: And that's just about it here from blog central after a pretty exciting day. Overnight markets should be a bit more quiet because of the Labour Day holiday in many countries.
Here's our evening wrap.
Thanks for reading and posting your comments!
5.08pm: Having said that, one of the smaller banks has just moved. The Bank of Queensland this evening said it will lower its standard variable home loan rate by 35 basis points to 7.11 per cent, from Friday, May 11.
BoQ chief executive Stuart Grimshaw said continued economic uncertainty had influenced the bank's decision to hold back 15 basis points this month.
“Increased competition in retail term deposits continues to put upward pressure on the bank’s cost of funds," he said.
4.49pm: What's missing? Right, a response by the big banks to the RBA's rate cut. The suspense may linger for days, analysts say.
Damian Smith, chief executive of rate tracking company RateCity, says the most likely scenario is that the major banks will wait until ANZ announces its new mortgage rates on Friday, May 11, before its rivals announce their own.
‘‘It’s quite possible none of them will make any serious move until then,’’ he says. ‘‘And they’ll allow ANZ to play it’s new role as unofficial price-setter in the industry.’’
ANZ, in setting rates independently of the RBA in 2011, triggered a flurry of out-of-cycle rate rises when their lifted the standard variable lending rate by 6 basis points to 7.36 per cent in February.
4.45pm: The Reserve Bank's index of commodity prices dipped 1.6 per cent in April, from March, due mainly to falls in coal, gold, oil and aluminium.
The index reading of 137.8 in April was 4.2 per cent lower than the same month last year. Much of that fall was due to lower prices for coal, iron ore and wheat, the RBA said.
4.39pm: Some late company news: toy distributor Funtastic expects a $48 million turnaround in its performance in fiscal 2012 due to improved margins and cost cutting.
Funtastic says it expects to post a net profit of $10.4 million in the year to July 31, up from a loss of $38.2 million in the previous fiscal year.
4.28pm: The dollar is still licking its wounds from the rate cut bashing it took earlier and is hovering around $US1.033.
Australian cash rates are now the lowest since December 2009, but still far above those in the United States, Japan and Europe.
Buit the Aussie could come under more pressure as interbank debt futures are pricing in a two-in-three chance of a further easing to 3.50 per cent in June and a total of around 70 basis points of cuts by the end of the year.
"The larger-than-expected move appears designed to ensure that a significant reduction in lending rates follows and to provide a positive "shock" to consumer and business confidence," says Michel Blythe, chief economist at Commonwealth Bank. "We are adding a further 25 basis point cut to our forecast profile. We have pencilled in the August meeting as the most likely time for a move."
4.25pm: Some stock price movements today:
- BHP: +1.2%
- Rio: -0.8%
- CBA: +1.7%
- ANZ: +0.3%
- Westpac: +0.4%
- NAB: -0.1%
- Woolies: +0.9%
- Telstra: +0.8%
- Woodside: +3.6%
- Wotif: -5.7%
4.20pm: Meanwhile, Japan's Nikkei has dropped 1.8 per cent to a 2-1/2 month closing low, weighed down by the strong yen. Most of the other major regional markets were closed today for the Labour Day holiday.
4.16pm: Among the sectors, energy jumped 1.4 per cent, consumer staples gained 1.2 per cent, financials added 0.7 per cent and materials 0.5 per cent.
4.13pm: The market has closed higher. The benchmark S&P/ASX200 index rose 32.9 points, or 0.7 per cent, to 4429.5, losing some of the momentum it had in the first minutes after the RBA's larger than expected rate cut. The broader All Ords gained 30.5 points, or 0.7 per cent, to 4497.7.
4.11pm: Among the reasons for the big demand for our government bonds is that Australia is one of only eight countries around the world to have a ‘‘AAA’’ credit rating with a stable outlook from major credit rating agencies.
US investment giant GMO, which manages $US97 billion ($93.4 billion), last month month said Australia's debt was attractive to foreign investors because government spending was sustainable.
"The only bonds we have much fondness for are Australian and New Zealand government bonds because only those countries give a combination of a decent real yield and government spending policies that are sustainable in the long run," GMO said in a note to investors.
4.09pm: Ok, government yields aren't at record lows, just at 60-year lows, as BusinessDay's Eric Johnston notes after going through the archives.
The last time Australian government long term borrowing costs were at these levels (10-year bond yield is at 3.57 per cent), was in 1951 when long term borrowing costs fell to a low of 3.17 per cent, according to preliminary Reserve Bank data.
4.01pm: Heading into the final minutes, the rate cut boost is starting to wear off and the ASX200 is back where it was shortly before the decision.
3.43pm: There's an important comment missing from the Reserve Bank governor's brief statement, as appropriate in the week before the federal budget, the explicit nailing of Canberra's surplus fixation as a key reason for the RBA having to move into stimulus mode, writes Michael Pascoe:
We're not in the zone of Wayne Swan's next budget “providing room” for the RBA to lower rates; the extent of fiscal drag, taking about 2.5 percentage points off GDP as Labor with Liberal urging rushes back into surplus, is forcing the RBA to cut and cut sharpishly.
There's a hint there between the lines and there should be more in the quarterly statement on monetary policy on Friday. The immediate key is that the governor specifies the RBA is cutting “to support demand” – not because output growth “was somewhat below trend”.
3.31pm: While many economists think this could be it for a while, markets are already betting on another rate cut this year and possibly next month. Interest rate futures see a nearly 70 per cent chance of a cut in June.
3.26pm: Treasurer Wayne Swan has wasted no time in claiming some credit for the big rate cut, saying it was made possible by the federal government’s fiscal discipline:
- Today’s interest rate cut and the two before have been made possible by disciplined fiscal policy delivered by this government.
- A responsible approach to the budget and disciplined fiscal policy is very important given the economic circumstances in which Australia finds itself and given global uncertainty.
- Returning to surplus ensures that the government is not generating price pressures in the economy.
Addressing concerns the big four commercial banks might not pass on the RBA rate cut, Swan said the banks were very profitable and had the capacity to do so.
‘‘Their customers will be very, very angry with them if they do not pass through this rate cut."
3.23pm: The bond market is also rallying, pulling the yield on the 10-year bond below 3.5 per cent for the first time ever. To repeat: these are levels not even seen during the peak of the GFC. Here's a chart showing just how low the yield has fallen (oops, sorry for the large scale).
3.16pm: Investors are obviously betting that the rate cut will boost spending. Shares in big retailers, which have struggled with weak consumer spending over the past two to three years, have jumped, with Myer rising 2.8 per cent, David Jones up 2 per cent and Woolworths up 1.3 per cent.
3.11pm: City Index analyst Peter Esho thinks the cut will have an immediate impact on spending, even if the banks don't fully price it through.
- In fact we actually do think the banks will be under pressure to pass it through.
- Margins are at comfortable levels and competitive pricing might actually cause volumes to improve for the banks on the RBA's move.
- The RBA is now likely to sit back and see how things pan out with enough ammunition up its sleeves should Europe turn ugly again over the next few months. "
3.06pm: Most economists were caught slightly wrong-footed by the bigger than expected cut. But the general reaction is positive, considering that inflation is benign and large parts of the economy in need of some stimulus.
Only two economists, Citi's Josh Williamson and Market Economics' Stephen Koukoulas, predicted a 50 basis point cut.
"For the very pragmatic RBA, the growth numbers in March and inflation number in April were a genuine surprise to them," Koukoulas says. "The RBA said: Let's play catch up and do the 25 basis point cut we could have arguably done in March and give 50 basis points in cuts knowing the banks probably won't pass it all along."
He believes there won't be another rate cut in June but there could be another 25 basis point later in the year, depending on the economy's strength and overseas sentiment.
3.03pm: Macquarie chief economist Richard Gibbs says the decision to cut rates by 50 basis points was unexpected but necessary.
- It signals a decisive shift in their thinking in relation to their outlook on growth in the economy.
- I think Friday’s statement (on RBA Monetary Policy) will show a decisive downgrade in the growth numbers, which will be very interesting for the budget next week.
- I think it’s interesting that they concede that financial market sentiment remains skittish and the November and December cuts certainly have not had that much of an impact in terms of their pass through to the economy.
- It's possible that the RBA cuts again later in the year, given the shift, which suggests that an easing bias is overdue.
2.58pm: Here's what some Twitterati have to say on the rates decision:
RBA has done a Kiwi in the 1983 Melbourne Cup... Looked to be loafing but have now caught up and are in front of the game.9.5/10 RBA— Stephen Koukoulas (@TheKouk) May 1, 2012
#RBA cuts 50bp. Great news, They have done the right thing at last. Will still need more though & I see the cash rate at 3.25% by year end— Shane Oliver (@ShaneOliverAMP) May 1, 2012
Stephen Koukoulas, by the way, was one of only two economists surveyed by Bloomberg to get the size of the cut right. The other was Citibank's Josh Williamson.
2.52pm: Meanwhile, currency strategist Derek Mumford says the size of the cut "smacks a little bit of panic", particularly one week from the federal budget.
"It smacks of a knee-jerk reaction to one round of inflation data," said Mr Mumford, of Rochford Capital.
2.50pm: The dollar is still down at $US1.0340, not showing much urge to recover from the rates shock. And Westpac currency strategist Robert Rennie says pressure on the Aussie is likely to continue.
Rennie reckons further weakness in Europe and weak US payroll figures this weekend will pull the dollar down further.
2.48pm: The big question now is how much of the rate cut will the banks pass on.
Repayments on a $300,000 mortgage will drop by just over $96 per month on average IF retail banks fully pass on the 50 basis-point cut.
MORTGAGE REPAYMENT DECREASE
$100,000 $700.41 $32.09
$150,000 $1050.62 $48.13
$200,000 $1400.83 $64.17$
250,000 $1751.03 $80.22
$300,000 $2101.24 $96.26
$350,000 $2451.44 $112.30
$400,000 $2801.65 $128.34
$450,000 $3151.86 $144.39
$500,000 $3502.06 $160.43
2.46pm: Low first-quarter inflation cemented the decision to cut rates again in May, while weak conditions outside of mining led the RBA to deliver a bigger-than-expected 50 basis points, says Moody’s Economy.com analyst Katrina Ell.
However, she believes the RBA won’t cut again from this point.
“The RBA should refrain from being too dovish going forward as domestic inflation is running a little too hot, and only being tempered by the strong currency,” says Ms Ell.
2.42pm: Here's how the RBA explains the size of the rate cut in today's statement by Glenn Stevens:
- This decision is based on information received over the past few months that suggests that economic conditions have been somewhat weaker than expected, while inflation has moderated.
- Since it last changed the cash rate in December, the board has maintained the view that the setting of policy was appropriate for the time being, but that the inflation outlook would provide scope for easier monetary policy, if needed, to support demand.
- The accretion of evidence over recent months suggests that it is now appropriate for a further step in that direction.
- In considering the appropriate size of adjustment to the cash rate at today’s meeting, the board judged it desirable that financial conditions now be easier than those which had prevailed in December.
- A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates.
2.38pm: Today's 50 basis point cut is the biggest since the GFC and takes the official cash rate down to 3.75 per cent.
Here's our breaking news story of the rate cut.
2.35pm: Meanwhile, investors are snapping up shares, drving the market to the day's highs. All sectors are posting gains, with energy up 1.9 per cent and consumer staples rising 1.4 per cent. Materials are up 0.9 per cent and financials have gained 0.8 per cent.
2.33pm: The dollar plunged on the decision, falling more than half a US cent to $US1.0344.
And Australian government bonds are continuing to rally, with the 10-year bond plunging to a record low of 3.536.
2.30pm: The RBA has cut by 50 basis points.
2.29pm: Last tips: dollar has moved back above $US1.04.
2.17pm: ‘‘The Australian dollar is waiting for the RBA decision today,’’ says Nomura director of forex sales Kurt Magnus. ‘‘If the Reserve Bank does cut 50 basis points, that is not factored into the Australian dollar. The Australian dollar will pull back sharply to $US1.0330.’’
2.13pm: Less than 20 minutes to go untio the RBA's rates decision is public. The dollar has lost some more ground and is now trading just below $US1.04.
Meanwhile, bonds are rallying. The yield on the three-year is at 2.94 per cent, while the 10-year just hit a new low of 3.607 per cent.
2.04pm: Stung by fluctuating oil prices, Delta Air Lines says it is taking matters into its own hands by purchasing a US refinery. The Atlanta-based airline will pay $1US50 million for a Phillips 66 refinery, in a bid to cut its jet fuel bill by $300 million a year.
"Acquiring the Trainer refinery is an innovative approach to managing our largest expense," says Richard Anderson, Delta's chief executive.
The Pennsylvania facility will be used to service Delta operations in the northeastern United States - including airports in New York.
1.55pm: Gold has inched up to a two-week high, supported by weakness in the US dollar with data indicating the US economic recovery might be losing steam.
Spot gold edged up 0.2 per cent to $US1667.45, its highest since April 13, before easing to $US1665.56 an ounce.
1.47pm: The future of Victoria's only brown coal briquette plant is under review, with its managers saying the new carbon tax will make it unsustainable.
Industrial Energy general manager Tony Ferguson says the Morwell Briquette Factory, in the Latrobe Valley, is under review.
''With the introduction of the carbon tax on 1 July 2012, the future of Victoria's only brown coal briquette manufacturer is expected to be unsustainable under a business as usual scenario,'' Mr Ferguson says.
1.25pm: UBS economists Scott Haslem and George Tharenou reckon there is scope for 50 basis points of rate cuts, but they probably won't happen all at once today. They write:
- While the housing and manufacturing sectors have been key casualties of the ‘two-speed’ economy, the extent of further weakness provides scope for lower rates, given lower inflation. We continue to expect two 25bp cuts across May and June (although a 50bp cut today cannot be completely ruled out).
1.19pm: Senex Energy has lost 7.9 per cent to $1.045, the most since August, as the Queensland Gas Company sold 73.9 million shares of the shale-gas and oil explorer. QGC are the second-biggest shareholder in Senex, according to Bloomberg.
1.12pm: Some more on China's PMI, which held above 50 (level indicating expansion) for a fifth month: the data signals China may be strengthening from the slowest pace of growth in almost three years, reached last quarter.
At issue for Premier Wen Jiabao is whether to extend a two-month pause in lowering banks’ required reserve ratios, as he seeks to rein in property and consumer prices without sending the economy into a so-called hard landing.
‘‘While things do look better, it’s too early to break out the champagne,’’ says IHS Global Insight economist Alistair Thornton. ‘‘Policy makers continue to grapple with the challenge of loosening enough to prevent a sharp slowdown but not loosening too much and sparking an inflationary spiral.’’
1.04pm: AWE has jumped 5.4 per cent after Credit Suisse and Citi upgraded recommendations on shares of the oil and natural gas explorer.
Citigroup raised the stock to ‘‘buy’’ from ‘‘neutral,’’ and Credit Suisse increased them to ‘‘outperform’’.
12.47pm: The 50bp market talk may also be a reason for the dollar's poor performance today. The Aussie is currently trading at $US1.0414, slightly lower than early this morning.
Traders say investors are cautious ahead of the RBA meeting. A cut of 50bp would be a surprise and likely weigh on the dollar.
A 25bp is likely to be supportive for the dollar, but the market's focus will be on the accompanying statement for any hint of another cut in June.
12.36pm: The market’s drive higher comes amid much talk of a bigger than expected rate cut by the Reserve Bank today at 2.30pm.
‘‘The potential of a 50 basis point cut this afternoon is getting people excited,’’ Burrell Stockbroking director Richard Herring said.
The vast majority of economists expects the bank to cut by just 25 basis points, but many say a bigger cut would be justified and are tipping another cut in June.
If the RBA cuts by 50 basis points today, the market may get a further kick up, says Steven Robinson, senior investment manager at Alleron Investment Management.
"If it's 50 it'll probably be seen in the short term as a positive by the market. But that's just a short term effect on the market."
12.23pm: Alesco shares have jumped 44 per cent after receiving a $188 million takeover offer from paint maker DuluxGroup.
The garage door maker's shares are trading at $2.01, in line with Dulux's offer of $2.00 a share. Dulux already owns nearly 20 per cent of the stock.
12.17pm: For those following technical analysis: the market has pushed through a major resistance level at 4417, the high hit last October, which analysts considered a key test of strength.
"A sustained move above the resistance, say through 4430, probably points to intrinsic strength and could portend a further rally," says Thomson Reuters foreign exchange analyst Krishna Kumar.
12.05pm: One for the midday shopping run: the heated supermarket wars have spilt over into the sale of Australia’s most prestigious and luxurious wine, Penfolds Grange, with Coles, Woolworths and new player Costco jostling to offer the lowest price possible for the latest release of Penfolds Grange 2007, BusinessDay retail reporter Eli Greenblat writes:
- Early investigations three days before the big launch have found that Dan Murphy’s, the big-box liquor store owned by Woolworths, will look to sell the latest Penfolds Grange release at around $580 a bottle, against the recommended retail price set by Penfolds of $625 a bottle.
- Not to be outdone Vintage Cellars, owned by Coles, is looking to match that offer and even though its computer systems currently have a price of $622.22 slated down for the Grange it potentially may offer other wines or deals as part of that price to compete with Dan Murphy’s.
- Costco, the new entrant into the Australian supermarket and grocery sector, will attempt to trump them all and in the United States is well known as a leading retailer of luxurious and high-priced wines to its club members.
11.57am: National Australia Bank chief economist Rob Henderson says the data showed successive interest rate cuts in November and December had done little to support house prices.
‘‘Three months after two interest rate cuts, what has happened to house prices? They have fallen,’’ he says. ‘‘So it doesn’t suggest interest rate cuts are much of a panacea for the housing market does it?’’
In other words, it's doubtful a rate cut today will do much to revive the struggling sector.
11.46am: More house price data has come in, this time quarterly numbers from the ABS, but they don't look good either.
Capital city house prices fell 1.1 per cent in the March quarter, after dropping a revised 0.74 per cent fall in the December quarter. Here's the breakdown:
CAPITAL CITY Q/Q Y/Y
Sydney -1.8 -4.6
Melbourne -2.2 -6.6
Brisbane +0.4 -3.7
Adelaide -0.9 -3.8
Perth +1.1 -1.7
Hobart -2.7 -6.7
Darwin +4.4 +3.5
Canberra +1.2 -0.5
11.38am: The UK’s biggest union has labelled National Australia Bank as ‘‘disgusting’’ for its plans to axe 1400 jobs from its British operations more than 17,000 kilometers away in Melbourne, with the announcement coming during the middle of the night in Europe.
NAB’s move to cut 17 per cent of UK workforce and close branches, was part of efforts to lower risks and save costs at its underperforming Clydesdale Bank.
However, the announcement of the cuts - which came yesterday morning in Australia, but in the middle of the night in the UK – was described as "nothing short of brutal for the UK workforce" by David Fleming, national officer of Unite, the union that covers finance sector workers.
11.34am: Some more details on Woodside's stake sale: Mitsubishi, Japan’s biggest trading company, and Mitsui this morning agreed to buy a 14.7 per cent stake in Woodside’s proposed Browse liquefied natural gas project for $2 billion.
The Mitsui and Mitsubishi venture, Japan Australia LNG, also agreed to acquire about 1.5 million metric tonnes of LNG annually from Browse. Its shares have jumped 4 per cent, rising to the highest in almost seven months.
“$2 billion for the stake is a very good value” for Woodside, Philipp Kin, an energy analyst at the Royal Bank of Scotland, said. “My question would be what is the price for the LNG contract, what are the potential trade- offs, if any.”
11.27am: Back home, Stockland has confirmed its revised guidance for the year to June, and says it expects $2.9 billion of capital to be released for future investment by selling non-core office and industrial assets by 2017.
In March Stockland cut its fiscal year 2012 earnings per share (EPS) guidance to 30.5 cents, down from a previous estimate of 31.6 cents.
Stockland shares are down 2 per cent.
11.20am: Japan's stocks, meanwhile, are trading sharply lower, showing no reaction to China's PMI. The Nikkei is down 1 per cent, on track for a 10-week low, as the yen continues its rise against the greenback.
‘‘The yen strengthened above the psychologically important barrier of 80 yen per US dollar, which means investors’ hopes that the yen would weaken toward the end of this year were frustrated. Investors need to review their strategies,’’ says Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities.
11.10am: The dollar, on the other hand, hardly reacted to the PMI data, slipping from $US1.0420 to $US1.0415.
11.07am: Shares are jumping in response to a decent reading of China's Purchasing Managers' Index.
The Purchasing Managers’ Index rose to 53.3 in April from 53.1 in March, lower than a forecast 53.6, but still advancing. Results above 50 indicate expansion.
Investors were spooked last week by HSBC's preliminary PMI reading, which indicated manufacturing may have contracted for a sixth month in April. The final reading of that survey, which has a different sample and methodology, is due tomorrow.
11.01am: Fixed-income assets - from Australian government debt to US Treasuries to global junk bonds - gained 0.57 per cent last month through April 27 including reinvested interest, outperforming other assets, according to Bank of America Merrill Lynch index data.
The MSCI All-Country World Index of stocks lost 1.1 per cent including dividends while the Standard & Poor’s GSCI Total Return Index of metals, fuels and agricultural products fell 0.5 per cent.
“Concerns of an economic slowdown and renewed risks over Europe are the biggest drivers,” Anthony Valeri, a market strategist in San Diego at LPL Financial, which oversees $330 billion, said April 26 in a telephone interview. “There’s renewed concerns about Europe, and Spain in particular.”
10.53am: Property developer and manager Mirvac Group is sticking with its full year financial guidance as market conditions remain in line with its expectations.
Mirvac manages retail centres, including the Broadway Shopping Centre in Sydney, and holds investments in many office, retail and industrial properties. Managing director Nicholas Collishaw today said market conditions since August 2011 were in line with the group’s expectations.
He confirmed Mirvac’s forecast of earnings per share of 10.5 or 10.6 cents per share in fiscal 2012, and a distribution of 8.2 cents to 8.4 cents per share.
10.49am: Ramelius Resources slid 15 per cent at the open after its quarterly report, released yesterday, flagged "extremely erratic" grades of the gold it is mining at its flagship Wattle Dam project.
"It is probably that the grade variation will continue for the remaining production life," the report said.
"Drilling below the current mine has been unsucessful in extending the ore body and without near term success, mining is anticipated to be completed in the frst half of 2013. Ramelius is currently progressing a number of projects to replace Wattle Dam production from mid 2013."
10.46am: Alesco has advised its shareholders to take no action in relation to a surprise $188.4 million takeover offer from paint manufacturer DuluxGroup.
DuluxGroup, which already holds a 20 per cent stake in Alesco, on Tuesday offered $2.00 for each remaining share in the garage door and cabinet maker. Alesco said it had only just learned of the offer and had not held any talks with DuluxGroup about a potential takeover.
‘‘The directors will review the offer documents and provide further advice in due course,’’ Alesco said in a statement.
10.40am: Property editor Simon Johanson reports that home owners will be keenly watching the Reserve Bank’s interest rate decision today following news that home values slid further last month.
Capital city home values fell 0.8 per cent in April, offsetting slight gains in February and March, property analysts RP Data said.
All cities, apart from Canberra, Adelaide and Darwin, experienced price falls. Sydney was down 0.3 per cent in April, Melbourne 1.7 per cent and Brisbane 1.3 per cent.
10.32am: Now for some of the sliders on the ASX200:
- Ramelius Resources - down 14.94%
- Aquarius Platinum - down 5.96%
- Mirabela Nickel - down 4.08%
- Imdex - down 3.57%
- Wotif.com - down 3.39%
- Billabong - down 2.65%
10.27am: Markets are now 0.3 per cent higher, bucking early signs that shares would post a sluggish start. To some of the early gainers on the ASX200:
- GWA Group - up 4.83%
- Woodside - up 4.04%
- AWE - up 4%
- Medusa Mining - up 3.12%
- Treasury Wine Estates - up 2.08%
- Seven West Media - up 1.69%
10.22am: Looking at how the sub indices on the ASX200 are performing:
- Energy - up 1.24%
- Telecoms - up 0.55%
- Health - up 0.39%
- Consumer staples - up 0.38%
- Materials - up 0.17%
- Financials - down 0.06%
10.19am: Woodside shares are 3.5 per cent higher to $36.13 after sealing a $2 billion deal to sell part of its stake in the proposed Browse LNG Development to Japan Australia LNG.
10.14am: In early trade, the All Ordinaries index is 7.2 points higher, or 0.2 per cent, to 4474.4, while the benchmark S&P/ASX200 is 8 points higher, or 0.2 per cent, to 4404.04.
10.06am: Early take - shares edging higher as the market opens. Up 0.1 per cent early.
9.57pm: Australian bond futures prices have opened slightly higher ahead of a much-anticipated rates decision by the RBA.
At 0830 AEST on Tuesday, the June 10-year bond futures contract was trading at 96.390 (implying a yield of 3.610 per cent), up from 96.375 (3.625 per cent) on Monday. The June three-year bond futures contract was at 97.030 (2.970 per cent), up from 97.010 (2.990 per cent).
9.53am: While most economists forecast a 25 basis point cut today, former RBA govenor Bernie Fraser is among those calling for a 50 basis point cut.
''Everyone is expecting at least a quarter and that loses its impact and its effect on confidence,'' Mr Fraser told ABC's 7.30 last night. ''You have to get ahead of the game occasionally and trump those expectations.''
Asked whether the bank should cut 50 points today, bringing its cash rate down from 4.25 to 3.75 per cent, Mr Fraser replied: ''Yes, I think the economic circumstances, signs of weakness in large parts of the economy and going with that a lack of worry about the inflation problems, provide an opportunity to do that.''
9.49am: Here are some of today's analyst rating changes:
- BT Investment Management cut to 'neutral' a Credit Suisse
- AWE raised to 'outperform' at Credit Suisse
- NAB cut to 'hold' at Deutsche Bank
- NAB cut to 'neutral' at JPMorgan
- Commonwealth Bank raised to 'overweight' at JPMorgan
- Commonwealth Bank upgraded to 'outperform' at Keefe Bruyette
- CSL downgraded to 'neutral' from buy at Nomura
- Commonwealth Property cut to 'sell' at Deutsche Bank
9.45am: Paint manufacturer DuluxGroup has offered $188.4 million for a complete takeover of garage door and cabinet maker Alesco. DuluxGroup already holds almost 20 per cent of Alesco shares, and has offered $2.00 for each remaining share.
DuluxGroup managing director Patrick Houlihan said the acquisition of Alesco would allow the paint company to grow in Australia and New Zealand by playing to its core strengths.
9.41am: Australian manufacturing activity contracted noticeably in April after a small dip in March, a private survey shows.
The Australian Industry Group/PriceWaterhouseCoopers Australian Performance of Manufacturing Index (PMI) fell 5.6 index points to 43.9 in April.
Readings below 50 indicate a contraction in activity. The drop reflected strong activity contractions in basic metals, textiles, wood products and furniture, clothing and footwear sub-sectors.
9.38am: Qantas shares could be in the spotlight today after the airline announced it would sack about 400 workers from across its heavy maintenance bases.
The airline confirmed the workers will be axed, but a spokeswoman said it was uncertain which of the three bases - at Avalon and Tullamarine in Victoria and Brisbane - would shed the jobs.
The spokeswoman said the decision would be made in coming weeks.‘‘The significant reduction of maintenance required on our aircraft means we do not need three separate maintenance bases,’’ she said.
9.35am: All eyes shift to the RBA at 2.30pm for the May rates decision. A Bloomberg survey of economists predicts the central bank will deliver some interest rate relief to Australian borrowers today. Of the 27 economists surveyed, 29 forecast a cut of 25 basis points while two predicted rates would fall by 50 basis points to 3.75 per cent.
- The SPI was 4 points lower at 4393
- The $A was trading at $US1.043
- In the US, the S&P500 lost 0.4% to 1397.9
- In Europe, the FTSE100 lost 0.7% to 5737.8
- Gold lost 60 US cents to $US1664.20 an ounce
- WTI crude oil lost 6 US cents to $US104.87 a barrel
- RJ/CRB commodities index lost 0.14% to 305.95
9.30am: Good morning folks. Welcome to the Markets Live blog for Tuesday.
This blog is not intended as investment advice
Contributors: Thomas Hunter, Peter Litras, Jens Meyer
BusinessDay with agencies