The sharemarket charted its second straight loss of the new financial year on Tuesday after lingering interest rate worries offset gains in oil and coal producers.

The S&P/ASX 200 closed down 0.4 per cent, or 32.5 points, to 7718.2. Shares extended early losses after minutes from the Reserve Bank confirmed the central bank had discussed raising interest rates last month and that its inflation forecast may be at risk.

RBC Capital Markets chief economist Su-Lin Ong said the minutes had been viewed “solely through the lens” of last week’s strong consumer price index indicator for May, which had reignited market fears of further interest rate increases.

Inflation angst

“The minutes highlighted the RBA’s angst around upside risks to inflation, its persistence, and a desire to ‘do what is necessary’ to return inflation to target even prior to May CPI,” she said.

“The key question now is whether that path is realistic with current policy settings.”

Traders are pricing a 30 per cent chance of an increase at the RBA’s next meeting in August, and a 54 per cent of chance of a rise by end of year.

Following the minutes, the rate sensitive real estate sector fell, ending the day down 1.4 per cent – the worst performing of the ASX’s 11 sectors. The sector was pulled lower by a 2.1 per cent decline in Goodman Group to $34.28.

The major banks also weighed on the sharemarket, led by National Australia Bank, which slipped 1 per cent to $35.69. Mining stocks also fell, led by drops in iron ore and lithium miners.

Those losses overcame modest gains from energy stocks, which added 2 per cent as oil held near a two-month high. Brent crude added US22¢ to $US86.82 a barrel after hitting a two-month high overnight on Monday.

The rise in oil came as traders anticipate potential supply constraints related to hurricane Beryl in the Gulf of Mexico. Woodside was up 3.1 per cent higher at $29.13.

Coal stocks have also remained buoyant after rallying on Monday on news Anglo American’s largest metallurgical coal project in Australia had been forced to halt production due to an underground fire. Whitehaven Coal added 5.7 per cent to $8.59, while Coronado Global Resources jumped 3.9 per cent to $1.34.

Stocks in focus

Lithium developer Liontown Resources was the best performing on the ASX, up 7.3 per cent to 95.5¢ after securing a $250 million ($379 million) funding deal with South Korean battery conglomerate LG Energy Solutions.

Bendigo and Adelaide Bank slipped 1 per cent to $11.31 after chief executive Marnie Baker announced she’s stepping down after 35 years with the bank.

ASX telco Superloop added 1.3 per cent to $1.57 after saying it expected to hit the top end of its full-year earnings guidance.

Discount jewellery retailer Lovisa dropped 3.7 per cent to $30.73. Analysts at Citi published a note on Tuesday, saying the company’s year-end store numbers could fall below current market expectations.

Baby Bunting lost 1.3 per cent to $1.51, following a stellar two-day run for the maternity and baby items retailer. Shares are now up nearly 30 per cent since it reaffirmed lower full-year net profit guidance last week, leaving some investors scratching their heads.