Interesting development downunder.
We sort of lead/lag. We have a bad Monday, due to the Friday close for everyone else. Then if you have a bad Monday, we throw in a bad Tuesday as well.
Threw out 3% yesterday, and within a short time of open, were down nearly 3% again.
Reserve Bank had been accused of pushing interest rates too high to slow inflation...we stalled...then bailed out our own banks (actually, we started early, the "Future Fund" gave liquidity to ANZ around 6 months ago, and more recently $4B was given to assist our non bank mortgage lenders who have lost their cheap money well in the US.
The "word" downunder is "Cash is King".
today the Reserve were rumoured to be dropping official interest rates by 0.5%.
Market down 3% before announcement.
Announcement now Interest to drop a full percent...almost unheard of...banks offering 80% of that reductions on mortgages.
Market went from 3% down, to over a percent up on the announcement...banks really up.
Ramifications ?
* Cash is less a king than it was a few hours ago ?
* More cash out of the depository side to go elsewhere ?
* Good or bad liquidity for the banks ?
More to the point, does losing share price, less interest on deposits mean that the old favourite (oil) will get ridden hard again ?
