The RBA announced today that they would be reducing interest rates to an all-time low of 1.25%, a cut of 0.25 percentage points. And we could be seeing another cut come October.
In response, we’re seeing Australian shares trade higher this afternoon, with the best Performer being Bega Cheese Ltd [ASX:BGA] share price (+ 3.41% to $4.85 a share).
The move comes after overwhelming pressure to stabilise a suffering economy, especially as we begin to see the slowing of retail sales this morning with Australians beginning to cut back their disposable spending.
Bega Cheese Shares see’s retail boosts with news of cuts
While these are small movements, it’s a breath of fresh air as consumers were beginning to hang on more tightly to their dollars.
The Australian Bureau of Statistics has reported that retail turnover fell by 0.1% last month, being the first monthly decline since December, and well below the expected increase of 0.2%.
A month earlier, we saw sales of household goods, clothing, and food takeaway purchases all fall by 0.9%, 0.7% and 1.2%. Business Insider reported non-food purchases suffered the heaviest, by 0.2% during the month.
Metcash in particular is welcoming the higher value to their price, after a slow climb from their suffering lows in December last year. Now, things are looking sunnier for the Aussie conglomerate company — the marketing powerhouse behind Home Timber & Hardware, Mitre 10, Foodland, IGA and their alcohol company components.
Abacus also saw a drop in their pricing in December last year, but have experienced a steady climb up to today. The investment management group announced this morning a purchase of a 19.9% strategic interest in Australian Unity Office Fund [ASX:AOF] for a total consideration of $95.6 million alongside Charter Hall Group [ASX:CHC].
Bega Cheese has seen a difficult few months in the lead up to this announcement, mainly with their court proceedings with Kraft Heinz over the ownership of the peanut butter trade dress, associated with the iconic yellow lid and label, and blue or red device. Bega won their right to continue using their marketing strategy on 1 May 2019, however it has not done much to win back shareholder confidence until today.
Whether high trading in the company will continue is uncertain, as we look at their unfortunate year.
What these cuts mean for the future of bega cheese shares
It’s welcome news, but is it enough?
According to Tim Roche, Fitch Rating’s senior director of the Asia-Pacific financial institutions, the driving force behind the cut was the possibility that cheaper credit and greater optimism about housing prices could help reignite activity in the housing market, including household borrowing. Unemployment is still a major factor in the cut, of course. But perhaps this little sigh is all we’re going to get.
After all, slapping on another band-aid won’t do too much. The economy is already sick. Watch carefully before you get too excited.
For Money Morning
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