The ASX 200 lost six points (-0.1%) to close the week at 4245.
Most sectors closed in positive territory for the week; however the largest two (materials and financials) weighed heavily on the market.
The banking majors were mixed, with NAB (ASX:NAB) recording a 3.4% loss after its disappointing first quarter trading update.
Big four rivals ANZ (ASX:ANZ) (+1.5%) and Westpac (+0.3%) both recorded gains and also announced they would increase their variable interest rates by six, and ten, basis points respectively.
Mining majors struggled on the back of weaker commodities and worse-than-expected earnings from some of the bigger companies. BHP (ASX:BHP) dropped 3.5% Rio Tinto (ASX:RIO) slipped 0.8%, with both reporting a fall in profit.
The energy sector performed well during the week, helped by stronger oil prices. Santos advanced 1.5%, while rival Woodside jumped 3.8%.
The major retailers were weaker, hurt by the higher Aussie dollar. JB Hi-Fi (-2.8%), Myer (-6.1%) and David Jones (-1.2%) all recorded losses.
Supermarket giant Woolworth benefited from its defensive status, ending the week with a 0.2% gain.
Economic News: What Does it Mean?
There was a plethora of economic data releases last week. The key ones were retail sales, ANZ’s Job Advertisement Survey, the RBA’s interest rate decision and its quarterly Monetary Policy Statement.
December retail sales fell 0.1%, against expectations of a rise of 0.2%. The disappointing result revealed the RBA’s December rate cut had little effect on sales.
ANZ’s Job Advertisements Survey showed the number of advertisements in December shooting up 6% from the prior month.
The total number of job advertisements was 0.7% higher than the same time 12 months ago.
The RBA shocked a majority of economists by leaving the official cash rate on hold at 4.25%. Expectations were for a 25 basis point cut.
RBA governor Glenn Stevens said “with growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy was appropriate for the moment.”
Mr Stevens also said that while financial market sentiment remains skittish, it generally has improved since the last meeting in December.
The statement by Mr Stevens did offer some hope for a rate cut down the track if demand conditions weaken materially.
Friday saw the RBA release its quarterly Monetary Policy Statement, in which it lowered its underlying inflation expectation by 25 basis points to 2.25% for the year to end of June.
The central bank also lowered its GDP growth forecast in the year to June from 4%, to 3.5%.
The RBA said that growth outside the mining sector is expected to remain below trend over the forecast period.
In the week ahead the major news out is January’s jobs report, which is slated for release on Thursday 11:30 am, AEDT.
Overseas Market and Commodity Wrap:
The European and US majors finished in negative territory, as investors became increasingly alarmed that a Greek debt deal would not be complete in time to avoid a disorderly default.
On the economic front, US jobless claims fell by 15,000 to 358,000 last week – against expectations of a rise and signalled the ongoing improvement in the labour market.
Despite the positive data, US markets were weaker; the Dow (-0.5%), Nasdaq (-0.1%) and S&P 500 (-0.2%) all recorded losses.
It was a relatively quiet weak on the economic front for Europe, with the region on edge regarding a debt swap deal for Greece.
Among the key European indices, the UK FTSE (-0.8%), the German DAX (-1.1%) and the French CAC (-1.6%) all were weaker.
The larger Asian markets defied the negative trend, with Nikkei (+1.3%) and Hang Seng (+0.1%) both strengthening.
Economic news out of China showed inflation rising 4.5% on an annualised basis last month.
The CPI reading came in 0.5% above expectations and disappointed investors hoping for new stimulus measures from Chinese authorities.
Higher Chinese inflation could mean that monetary policy will remain tight, thus hurting commodity demand. On the back of this most commodities declined, with lead (-4%) and zinc (-3.6%) being two of the worst performers.
Gold fell 0.9%, while oil was 0.9% stronger amid concerns of more unrest in the Middle East.