PERTH: The Australian sharemarket is trading softer for a third straight day, as investors digest a surprise rate rise from Westpac and continuing weakness in commodity prices.
Resources stocks were the main drag on the bourse at noon, with energy and mining stocks continuing to decline after a strong last week.
At 12.05pm (AEDT), the benchmark S&P/ASX200 index was down 32.1 points, or 0.62 per cent, to 5170.8, while the broader All Ordinaries had shed 29.8 points, or 0.57 per cent, to 5204.8.
CMC chief market analyst Ric Spooner said local investors were weighing negative news on a number of fronts, including Westpac’s decision to raise its variable mortgage rate, weak US leads and further declines in commodity prices overnight.
“Westpac’s announcement that it will increase its variable mortgage rate by 0.2 per cent to compensate for the negative impact of having to raise additional capital is a reminder that regulatory safety initiatives invariably come at a cost,” he said.
Mr Spooner said the combination of weaker commodity prices and news of Westpac’s rate hike is a negative for the Australian dollar and may be a source of relative support for Australian stocks with positive exposure to a weak currency.
The Australian dollar plunged on the Westpac news, diving towards the US72c level, as Macquarie analyst James McIntyre said the rate hike would make a further RBA rate cut inevitable.
“In our view, the announcement by a major bank of an out-of-cycle 20bp rate hike — for investor AND owner-occupier loans — all but seals the deal for a November rate cut from the RBA,” Macquarie Securities economist James McIntyre said.
Mr Spooner said the move, especially if followed by other major banks is likely to dent consumer and property investor confidence, at least initially.
Meanwhile, the Westpac-Melbourne Institute Survey of consumer sentiment showed a Turnbull-led improvement in consumer confidence, but not by enough to offset the dominant number of economic pessimists in the country.
