Aussie Dollar Slides on RBA Rate Cut; Japan Shares Drop

Australia’s dollar weakened, bond yields fell to record lows and domestic shares rallied after the central bank cut interest rates by more than forecast. Japan’s stocks slid the most in two weeks as companies predicted profits that will trail analyst estimates.
The so-called Aussie depreciated 1 percent to $1.0329 as of 2:14 p.m. in Tokyo. The nation’s S&P/ASX 200 Index jumped 1 percent and 10-year note yields declined as much as 14 basis points to 3.53 percent. Japan’s Nikkei 225 Stock Average (NKY) slumped 1.7 percent, while Standard & Poor’s 500 Index futures climbed 0.1 percent. Copper retreated 0.3 percent.

The Reserve Bank of Australia lowered its key rate to 3.75 percent from 4.25 percent, the biggest reduction in three years, as data today showed the nation’s home prices declined in the first quarter and a manufacturing gauge slid to a seven-month low in April. For the first time since the start of 2008, bonds were the only global investments to provide positive returns last month amid renewed concern the global economy is slowing.
“It’s a nice surprise and it was the right move,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages almost $100 billion. “Given the weakness that we’ve seen across the board in manufacturing and retail, a quarter point cut wasn’t going to be enough. They have done the right thing.”

Aussie Weakens

The Aussie weakened against all of its 16 major counterparts. An index measuring prices for established houses in eight major Australian cities dropped 1.1 percent last quarter from the previous three months, the government said today. A gauge of the country’s factory output fell 5.6 points to 43.9 last month, according to a survey by the Australian Industry Group and PricewaterhouseCoopers.
Markets in China, Hong Kong, India, South Korea and Singapore were among those closed today for a holiday. The MSCI Asia Pacific Index slid for a second month in April, losing 1 percent.
Sharp Corp. (6753) tumbled 9.1 percent for the steepest drop in the Nikkei 225. Japan’s biggest maker of liquid-crystal displays forecast a wider-than-estimated annual loss. Tokyo Electron Ltd. (8035), which produces semiconductor manufacturing equipment, sank 8.4 percent after its earnings estimate trailed analysts’ projections.
“Investors can’t get optimistic about the Japanese economy,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo. “The number of companies where earnings are improving as much as investors’ expectations is relatively small.”

China Manufacturing

China’s manufacturing grew for a fifth month in April, hurting the case for policy makers to ease monetary policy. The Purchasing Managers’ Index rose to 53.3 from 53.1 in March, the nation’s statistics bureau and logistics federation said. The median forecast by economists in a Bloomberg survey was for a reading of 53.6. Results above 50 indicate expansion.
Investors will also get data on U.S. factories today. The Institute for Supply Management Inc.’s manufacturing gauge fell to 53 this month from 53.4 in March, according to the Bloomberg survey median ahead of the data today. Pfizer Inc., Archer Daniels Midland Co. and Legg Mason Inc. are among S&P 500 companies scheduled to report earnings.
Brent oil for June settlement retreated 0.2 percent to $119.25 a barrel on the London-based ICE Futures Europe exchange. Oil in New York traded near the lowest close in two days before a government report that may show crude inventories rose to a 21-year high in the U.S., the world’s biggest consumer of the commodity.
Fixed-income assets -- from Australian government debt to U.S. Treasuries to global junk bonds -- gained 0.7 percent last month including reinvested interest, according to Bank of America Merrill Lynch index data. The MSCI All-Country World Index of stocks lost 1.1 percent including dividends while the Standard & Poor’s GSCI Total Return Index of metals, fuels and agricultural products fell 0.5 percent. The U.S. Dollar Index (DXY) dropped 0.29 percent.
To contact the reporters on this story: Lynn Thomasson in Hong Kong at


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