Interest rate cut hopes push market higher

The S&P/ASX 200 (ASX: XJO) (Index: ^AXJO) is chugging higher after RBA governor Glenn Stevens yesterday indicated the likelihood of a rate cut when the central bank meets next week.

The market is up over 0.5% with strong yield plays such as Telstra (ASX: TLS), the big four banks, Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) all posting gains.

The money market rate is now pricing in an 85% chance of a 25 basis point cut, which will take the cash rate to a record low of 2.5%. Yesterday, Mr Stevens said rate cuts in past two years have helped non-mining sectors but there was still room to move. “There are clearly signs of policy working in this respect, though not, to date, by so much that we see a serious impediment to further easing, were that to be appropriate from an overall macroeconomic point of view”.

This has pushed the AUD down to just above 90 US cents, however some beneficiaries are weaker today. BHP (ASX: BHP) and Rio Tinto (ASX: RIO) are down 0.77% and 0.26% respectively.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

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