Australian shares reset a record high on Thursday, as market participants zeroed in on hopes of an imminent interest rate cut by the Reserve Bank.

The S&P/ASX 200 rose 0.6 per cent, or 46.7 points, to 8493.7 at the market close. The All Ordinaries Index gained 0.5 per cent. All 11 of the ASX’s equity sectors were higher, with energy and consumer discretionary names leading the rally.

The Federal Reserve announced it would hold the federal funds rate to a 4.25 per cent to 4.5 per cent range on Thursday morning, with chairman Jerome Powell reasoning that he expected further progress on inflation falling before the central bank considered an interest rate cut.

But Powell’s cautious tone failed to dull positive sentiment in Australia following softer-than-expected inflation readings for December. Those readings spurred the last of the big four banks – NAB – to bring forward its prediction for the timing of the RBA’s first interest rate cut to February.

Australian shares rallied following that announcement in afternoon trading, while the Australian dollar extended losses, falling to US62.22¢. Major stocks across the index posted significant gains: BHP rose 0.9 per cent to $39.48, Woodside 0.7 per cent to $24.73 and CSL rose 0.9 per cent to $279.73.

Australia’s major banks all rose. Macquarie briefly notched its own record high at $241.99 before falling to $241.70 at the market close. Commonwealth Bank lifted 1 per cent to $160.61, NAB 1 per cent to $39.90 and Westpac 0.7 per cent to $33.78. The interest-rate sensitive utilities sector pared back losses after a sell-off in early trading.

IG analyst Tony Sycamore forecast the ASX could “be on track for its best January since the 6.22 per cent gain that followed China’s reopening from lockdown in 2023”. He noted the index’s consumer discretionary sector “had been the standout” in the first weeks of 2025, at a time when an interest rate cut was deemed imminent.

Karoon Energy was the index’s biggest gainer on Thursday. The shares rose 7.2 per cent to $1.54 after the company announced an on-market share buyback of $US75 million shares in a bid to boost its lacklustre share price.

Credit Corp Group posted the largest loss on the S&P/ASX 200, plummeting 12.6 per cent to $15.95 on Thursday after analysts at E&P Capital said the debt buyer’s US business growth had undershot expectations.

Bitcoin rallied 3.1 per cent to $US105,402, boosted by a rally in technology stocks in after hours trading. In Singapore, the benchmark iron ore futures contract rose 0.6 per cent to $US105.25 a tonne.

Stocks in focus

In corporate news, Magellan Financial Group fell 8.3 per cent to $11.38 after it announced the departure of its veteran infrastructure boss, Gerald Stack.

IGO dropped 1.8 per cent, to $5.06, after posting a $79 million earnings loss in the December quarter owing to lower revenues from the miner’s Tianqi Lithium Energy Australia joint venture.

Zip Co sank 25.4 per cent to $2.44 by Thursday afternoon after the buy now, pay later company’s second-quarter results fell short of expectations.

And Nickel Industries dropped 2.5 per cent, to 78¢, after earnings for the company’s Indonesia-based Hengjaya Nickel, Ranger Nickel and Oracle Nickel rotary kiln electric furnace projects – in which it owns a 80 per cent stake – tumbled.