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Question over QE after RBA's subtle shift

·4-min read

Investors are debating whether the Reserve Bank might be signalling it's about to reduce quantitative easing efforts after some subtle changes in the bank's language.

The central bank left the cash rate at 0.1 per cent on Tuesday but analysts were more interested in the decision to drop a line from last month's statement.

ANZ Bank head of Australian economics David Plank noted the RBA statement dropped a previous commitment that the bank was prepared to make more bond purchases.

"It is hard not see the shift in language as a possible signal," Mr Plank said.

The RBA has been buying bonds since last year as part of efforts to help the economy through the coronavirus pandemic.

Mr Plank said the next phase of quantitative easing might not be the same size as earlier ones.

Any tapering of those efforts could represent an important shift for rates and investors.

Westpac head of rates strategy Damien McColough agreed the change in language could suggest a tapering of quantitative easing.

However both men said they did not expect this.

The Aussie dollar slumped from about 77.60 US cents to 77.40 US cents as foreign exchange traders looked elsewhere for a rate rise.

The rates decision gave shares a short-lived boost but not enough for gains.

The benchmark S&P/ASX200 index closed lower by 19 points, or 0.27 per cent, to 7142.6.

The All Ordinaries closed down 14.6 points, or 0.2 per cent, to 7392.1.

Energy shares were best and rose 1.34 per cent.

A meeting of the Organisation of Petroleum Exporting Countries, due Tuesday, will discuss supply.

Santos was one of the best ASX energy performers and rose 2.07 per cent to $6.91.

Financials fared worst and lost 0.72 per cent.

ANZ was worst of the banks and shed 1.39 per cent to $28.31.

Bankers may be concerned by the possibility of customers in Victoria needing more assistance.

The state's seven-day coronavirus lockdown appears set to be extended after three more infections were reported.

This brings the total from the Melbourne outbreak to 54.

One of the biggest market movers was software vendor for the car industry, Infomedia.

Shares were higher by 12.92 per cent to $1.53.

The company said sales were increasing, and full-year sales were forecast to be between $95 million to $96 million.

Full-year cash earnings before interest, tax, depreciation and amortisation were expected to be between $19 million and $20 million.

No estimates had been given before.

Infomedia has also completed its purchase of US-based e-commerce vendor SimplePart.

Milk supplier Synlait climbed 8.54 per cent to $3.05 after flooding in the Canterbury region of New Zealand did not prevent staff collecting milk from farmers.

Several farms in Synlait's network suffered significant damage and the company said collecting milk was challenging due to road closures.

There was no change to full-year production plans or the earnings forecast.

Supermarket giant Woolworths said it completed buying more shares in data analytics provider Quantium.

Woolworths has raised its shareholding from 47 per cent to 75 per cent.

Woolworths shares were higher by 0.34 per cent to $41.76.

There was no lead from US markets due to the Memorial Day public holiday.

On Wednesday, gross domestic product figures for the March quarter are due.

NAB analysts tipped a 0.7 per cent rise, less than the previous two quarters.

The Australian dollar was buying 77.50 US cents at 1721 AEST, higher from 77.26 US cents at Monday's close.


* The benchmark S&P/ASX200 index closed lower by 19 points, or 0.27 per cent, to 7142.6 on Tuesday.

* The All Ordinaries closed down 14.6 points, or 0.2 per cent, to 7392.1.

* At 1721 AEST, the SPI200 futures index was up 17 points, or 0.24 per cent, to 7164.


One Australian dollar buys:

* 77.50 US cents, from 77.32 cents on Monday

* 84.84 Japanese yen, from 84.84 yen

* 63.37 Euro cents, from 63.40 cents

* 54.44 British pence, from 54.53 pence

* 106.48 NZ cents, from 106.58 cents.

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