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Market Update

Australian Rate Drops to Six-Decade Low, ANZ Net Up 3%

Author: Marcus Jacob
Last Update: 9:28 AM ET May 05 2015

5:30 PM Sydney – Market indexes in Sydney gyrated before and after the rate decision announcement from the Reserve Bank of Australia. RBA lowered its reference rate to historic low of 2% and the central bank highlighted weak economic conditions.

In volatile and active trading, Australian market indexes gyrated before and after the rate decision from the RBA.

As widely expected, the Reserve Bank of Australia lowered its benchmark interest rate by 25 basis points, the second reduction this year to a record low of 2%.

The last rate reduction of 25 basis points was announced in February and the central bank said the quarterly economic forecasts on Monetary Policy is scheduled to release on Friday.

With the latest cut, the reference rate has been lowered to the lowest since 1950s and the RBA governor Glenn Stevens added capital spending in mining and non-mining sectors is likely to remain weak but there are some “improved trends in households demands” over the last six months.

Stevens also said employment growth has been strong in the last six months but the economy is likely to “operate at below spare capacity for some time yet.”

The dollar dropped after the rate cut decision to 77.88 U.S. cents but quickly recovered to as high as 79.50 U.S. cents.

The trade deficit in March shrank to $1.32 billion followed by downwardly revised $1.61 billion deficit in February, the Australian Bureau of Statistics reported.

In March exports dropped 2% to $27.22 billion and imports declined 2% to $28.54 billion.

On the economic front, the service index in April swung declined to 49.7, a fall from 50.2 in March, the Australian Industry Group said.

Any reading below 50 indicates contraction of growth and any reading above indicates expansion of growth.

Australian dollar closed at 79 U.S. cents and in stock trading turnover jumped to 855 million shares worth $6.2 billion.

At close, the ASX 200 Index fell 1 to 5,826.50 and the broader All Ordinaries Index edged up 0.3 to 5,816.20.

In commodities trading, gold gained US$5 to US$1,190 an ounce and Brent crude edged down 0.04 cents to close at US$66.41 a barrel.

Australian Stock Movers

Australia and New Zealand Banking Group gained 2.6% to $34.12 after the bank reported net interest income in the first-half ending in March climbed 5% to $15.39 billion from $14.43 billion in a year ago period

Net profit in the period jumped 3% to $3.51 billion compared to $3.39 billion and diluted earnings per share slipped to 124.6 cents from 120.6 cents in the same period a year ago.

The banks announced a rate cut on retail home loans by 25 basis points from May 8 after the RBA lowered its cash rate to a record low of 2%.

The lender forecasted to maintain a payout ratio for the current financial year toward the upper end of 65% to 70% of cash profit.

On Monday, ANZ said it plans to sell its car and equipment finance business.

Ardent Leisure Group surged 11.3% to $2.21 after the premium leisure services provider said revenue in the nine months ending in March soared 17.2% to $444.9 million and operating profit climbed 10.9% to $101.6 million from a year ago period.

The entertainment and theme park company reported revenues in its Main Event segment jumped 58.3% to $103.91 million while total revenues in Goodlife Health Clubs advanced 10.2% to $133.91 million in the same period a year ago.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc