Mining rally pushes ASX higher as RBA keeps interest rates on hold

Australia’s surging mining giants pushed the ASX higher on the day the Reserve Bank left the cash rate unchanged.

A surging mining sector pushed the Australian sharemarket higher on Tuesday, even as the Reserve Bank warned further interest rate rises were still possible as the Board battled to return inflation to a two to three per cent target band.

The benchmark S&P/ASX 200 index lifted 0.36 per cent, or 27.4 points, to end the day at 7703.2 points.

The broader All Ordinaries index rose 0.41 per cent, or 32.6 points, to finish at 7957.8 while the technology index slipped 0.15 per cent to close 4.6 points lower at 3056.1.

Mining giant BHP jumped three per cent to hit $43.69 a share after iron ore prices rebounded to more than $100 per tonne following weeks of sustained falls.

Rio Tinto rose 2.3 per cent to end the day at $120.18.

eToro market analyst Josh Toro said the commodities uplift had pulled up the broader ASX given the outsized weighting of the bourse’s mining stocks.

“BHP will be by far the biggest pull on the market to the upside,” he said.

“That’s a big boost to the market.”

The ASX 200 closed higher on Tuesday following a rebound in iron ore prices. Picture: NCA NewsWire / Jeremy Piper

Four of 11 industry sectors ended in the green, with Materials leading with a 2.11 per cent gain.

Energy closed 1.98 per cent higher and Real Estate and Utilities also booked gains.

Industrials, IT, Health Care, Discretionary, Telecommunications, Financials and Staples ended in the red.

Energy powerhouses Woodside Petroleum and Santos lifted 2.33 per cent and 1.77 per cent, respectively.

The RBA left the cash rate unchanged at 4.35 per cent but said in a statement the interest rate path remained “uncertain” and the Board would not rule “anything in or out.”

Mr Gilbert said the RBA’s Tuesday statement would likely push back the time frame for an interest rate cut.

“It has pushed the financial sector back a fair bit because we’ve seen those rate cut expectations firmly pushed back,” he said.

“Before this week, markets saw about a 70 per cent chance we would get a cut in June, whereas as of today, after the decision that is at about 50 per cent.

“And markets are really looking now towards August as that day.

“She (RBA Governor Michele Bullock) has reiterated, it is going to be a bumpy ride to get inflation back to target and they are not going to be in a rush to cut interest rates.”

Reserve Bank of Australia Governor Michele Bullock spoke to reporters after leaving the cash rate unchanged at 4.35 per cent. Picture: NCA NewsWire / Jeremy Piper

Ms Bullock flagged economic headwinds from China as a key point of uncertainty for the Board and said the “war” against inflation was not yet “won”.

“We can’t rule anything in or out,” she told reporters after the decision.

The big four banks all edged lower, with Commonwealth Bank closing 0.58 per cent to settle at $115.78 a share, Westpac falling 0.3 per cent to hit $26.25 a share, NAB dipping 0.26 per cent to $33.94 and ANZ falling 0.21 per cent to close at $28.80.

The Aussie dollar fell 0.53 per cent against the Greenback to buy US65.2c.

In corporate news, KMD Brands, which boasts the RipCurl and Kathmandu clothing lines, rose 2.1 per cent throughout the day despite posting a 14.5 per cent fall in half-year revenues to $468m and a net loss of $9.6m.

Queensland coal business New Hope Corporation lifted 3.84 per cent after reporting a half-year net profit of $251.7m.

Gold miner Bellevue Gold boomed seven per cent to hit $1.83 a share.

Originally published as Mining rally pushes ASX higher as RBA keeps interest rates on hold