The Australian sharemarket rallied on Tuesday, setting a fresh record for a second session, amid mounting speculation that the US Federal Reserve will kick off its easing cycle with a jumbo rate cut later this week.

The benchmark S&P/ASX 200 Index rose 19.3 points, or 0.2 per cent, to 8140.9 after briefly touching an intraday peak of 8150.5 points. All 11 industry groups climbed, led by the tech and property sectors.

Overnight, the Dow and the equal-weight S&P 500 each reset record highs, though gains were muted before the Fed policy meeting on Thursday morning (AEST).

JPMorgan said it expected the world’s most important central bank to cut rates by half a percentage point on Thursday AEST, while US-based Evercore ISI said the likelihood of a half-point move was continuing to edge up.

The big question

While the bond market is fully priced for a quarter point rate cut this week, traders are pricing in a 67 per cent chance of an outsized move from the Fed, which is up from 60 per cent on Monday and 32 per cent last week.

“The question in markets is whether the Fed cuts by 25 basis points or 50 basis points,” said Insight Investment’s Steve Waddington in a note.

“During the market turmoil of early August, the market moved to fully price a 50 basis point cut. The subsequent market recovery and a slightly higher US core [inflation] print last week saw market pricing move back towards 25 basis points. So, from current pricing, whatever the outcome, the ‘surprise’ will be the largest in 15 years.”

Xero paced the rate-sensitive tech sector higher, rallying 2.6 per cent to $148.10 after announcing plans to acquire global cloud reporting, insights and analytics company Syft Analytics for up to $US70 million ($104 million).

TechnologyOne gained 2.4 per cent to $23.710.

Property stocks were also well bid, led by Mirvac, which rallied 1.3 per cent to $2.28, and Vicinity Centres, up 1.3 per cent to $2.360. Among the blue chips, it was a muted session for the big four banks with Westpac the biggest mover, up 0.7 per cent to $33.03.

The iron ore majors had a mixed session. BHP was unchanged at $39.55, while Fortescue tracked a higher iron ore price in Singapore, rallying 1.8 per cent to $17.49.

Stocks on the move

In corporate news, Platinum Asset Management confirmed that Phil King’s Regal Partners had put forward a buyout bid for the asset manager. The news sent Platinum shares soaring 13 per cent to $1.115, while Regal fell 3 per cent to $3.20.

Under the proposed deal, shareholders would receive 0.274 Regal shares for each Platinum share held. Platinum said it would also pay shareholders a 24¢ dividend from cash reserves should the deal go ahead.

Elsewhere, shares in New Hope climbed 1.7 per cent to $4.32 after the coal miner issued a 22¢ dividend.

Pacific Smiles jumped 6.3 per cent to $1.87 following a sweetened buyout offer from bidder Genesis Capital.

Adairs is 2.3 per cent higher at $1.79 after appointing former Country Road managing director Elle Roseby as its next chief executive.

And shares in West African Resources are 2.7 per cent higher to $1.54 after analysts at Macquarie increased their price target for the stock.