The Australian stock market pundits pretty well ruled out a Melbourne Cup Day fate cut on November 1 after the inflation figures came in stronger than expected this morning.
The key measure of inflation, the Consumer Price Index, jumped 0.7 percent in the last quarter, against 0.4 percent over the June period.
This brings the annual inflation rate up to 1.3 percent from 1 percent, an early sign that the Reserve Bank of Australia’s low interest rate policy is starting to stimulate spending.
The inflation numbers pushed the Aussie up to US77 cents, and ThinkMarkets senior market analyst Matt Simpson was quoted as saying: “The RBA will see today’s pick-up in quarterly inflation as a net positive from record low rates of 1.5 per cent, so this pushes any concerns of further easing well back into 2017.”
The rest of the week will no doubt see investor love for the dividends paid out by the Big Four Banks called in question as the NAB kicks off the full-year reporting season.
Analysts are in a broad consensus that the bank’s profits will fall from the first half result of $3.22 billion (but still delivering a full year result of $6.4 billion or so), but will that mean a cut in the dividend from 99 cents per share?
Shares in the Big Four Banks are a staple in the investment portfolios of many Australians, not just for the capital gains but also for the dividends.
When, for example, a portfolio of CBA shares can deliver dividends equivalent to 5 percent on an investment, this is a lot more attractive than even the best term deposits, which will deliver just over 3 percent.
If the shares are also going up, then that is a major win-win.
While this happy scenario was the market reality in the recent past, things have turned lately.