Investors resume yield chase

Investors resume yield chase

By Ric Spooner (Chief Market Analyst, CMC Markets)
12.05 AEDT, 2 April 2013

Investors appear to have returned from the Easter break in a mood to buy high yielding, large cap stocks. This morning’s rally has been driven by higher prices for banks and the large supermarkets, Woolworths and Wesfarmers.

This morning’s support for higher yielding stocks indicates a market view that the RBA will maintain its easing bias at today’s meeting. Although last month’s sharp jump in jobs growth makes it more likely that the RBA will not cut rates again, the consensus is that they will indicate a continuing preparedness to cut if the labour market deteriorates. With European risks remaining, the Australian economy forecast to grow a bit below trend and inflation under control, it may be some time before the RBA actually moves to increase rates.

Energy stocks Origin and Woodside also attracted buyer support today. This reflects potential for the value of existing and previously approved gas facilities to be marked up, as controversy over the approval process for development of new CSG resources mounts.

Other resource stocks were a drag on the market today. Resource investors are responding to weaker PMI figures in both the USA and China. While the outlook for both economies remains solid, growth in the second quarter may moderate as tighter fiscal policy in the US and measures to subdue China’s property market come into effect.

www.cmcmarkets.com

ENDS

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