The Australian sharemarket started off strong this morning, driven by a rise in international equity markets overnight as well as a rebounding oil price. But that gain faded in the afternoon with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) slipping from a high of 5,970 points to just 5,939.
The market's late decline came after data showed stronger than expected employment data, provided by the Australian Bureau of Statistics. While the reliability of the ABS jobs data has certainly been questioned in the past, it showed that 37,700 jobs were added to the economy which saw the unemployment rate slide from 6.3 per cent to 6.1 per cent. By comparison, most analysts were expecting roughly 15,000 jobs to be added and the unemployment rate to remain at 6.3 per cent.
Ordinarily, strong economic data should evoke a positive reaction from investors, but not so in this market. The strong data is the latest indication that the Reserve Bank of Australia's February interest rate cut may have been enough to stimulate the economy, reducing the chance of another interest rate cut when it meets on 5 May.
It goes to show how out of whack segments of the market have become, where investors hope for bad news to improve the chances of lower interest rates. Notably, Telstra Corporation Ltd (ASX: TLS) has retreated from its intra-day high, as have each of the Big Four banks. Australia and New Zealand Banking Group (ASX: ANZ), for instance, has slipped from a 0.9% rise to just 0.1%. All of these companies are considered to be amongst Australia's most popular dividend stocks.
As it stands, further interest rate cuts are expected during the year, with some analysts still expecting they will fall to 1.75 per cent. But whether or not the RBA pulls the trigger when it meets in May remains to be seen.