Australian share market rallies ahead of Reserve Bank December rates call

Ahead of the RBA’s final board meeting for 2023, the Australian share market reached a 10-week high on Monday as fears of further rate tightening continue to fade.

It was a positive start to the week for the Australian share market which rallied on Monday as investors raised their bets that the Federal Reserve and other central banks had finished raising interest rates.

Josh Gilbert, market analyst at eToro said the market was increasingly optimistic of a rate cut despite attempts by some Federal Reserve policymakers, including chairman Jerome Powell, to hose down expectations.

“The market is believing that rate cuts are coming in the first half of 2024,” Mr Gilbert said.

“Powell and other Federal Reserve members are still trying their best to break down market expectations on it, but market optimism is just running away.”

While initially climbing to a 12-week high after markets opened, the benchmark S & P/ASX200 added 0.7 per cent, or 51.5 points, to reach 7,124.7 points at the closing bell.

ASX heavyweight BHP added 1.7 per cent to $47.14. Picture: AFP / William West

Meanwhile the broader All Ordinaries climbed a similar amount, reaching 7,336.1 points at the end of trading.

The Australian dollar finished lower to buy US66.58c at the close of markets.

Nine of the 11 industry sectors finished in the green, with interest rate-sensitive tech and real estate stocks the best performers.

Miners also helped lift the benchmark with ASX heavyweight BHP rising 1.7 per cent to $47.14. Rio Tinto and Fortescue firmed 1.6 per cent and 0.4 per cent, respectively.

Also in the materials sector, gold spot prices soared above $US2100 an ounce, surpassing the previous high set on August 7, 2020.

Miners of the precious metal tracked the rise in the commodity’s price, with Northern Star Resources adding 3.7 per cent to $12.90, Newmont increasing 2.9 per cent to $62.54, and Regis Resources climbing 1.8 per cent to $1.98.

Tech stocks were the best performers on the benchmark, adding 1.9 per cent. Sector heavyweights Xero climbed 1.7 per cent to $102.80, Wisetech rose 1.9 per cent to $67.43, and Altium jumped 1.5 per cent to $45.32.

Losses continued in the energy sectors amid expectations that the supply cuts announced by the OPEC+ cartel will do little to inflate prices. Picture: AFP / Vladimir Simicek

Energy stocks finished in the red as global oil prices continued to slide on Monday as investor scepticism about the depth of supply cuts by the OPEC+ cartel continued with Brent Crude sliding towards $US78 a barrel.

Woodside sank 1.6 per cent to $30.35 and Santos fell 1.2 per cent to $6.82.

Investors are closely watching the Reserve Bank’s final board meeting for 2024, with markets pricing in near 100 per cent odds that the central bank will keep rates on hold at 4.35 per cent.

Mr Gilbert added that recent data flows, including monthly inflation and retail sales data, had “little bit of weight” off governor Michele Bullock’s shoulders with the central bank afforded further time to assess the impact of rate hikes to date.

“I think if the data continues to move in the right direction, it is good news,” Mr Gilbert said, before adding that a further hike was possible.

“I don’t think the battle is necessarily done.”

“I doubt we’ll see any sort of lighter tone from Bullock in tomorrow’s statement … hawkish rhetoric is going to be front and centre.”

The proposed buyout of Origin Energy by a Brookfield-led consortium was defeated at a shareholders’ meeting on Monday afternoon. Picture: Supplied.

In company news, a $20bn takeover bid for Origin Energy failed with the company’s largest shareholder AustralianSuper rejecting the offer lobbed by Brookfield and EIG. AustralianSuper has a 17 per cent stake in Origin, which was enough to block the bid that required support from 75 per cent of investors. The energy retailer dropped 3.9 per cent to $7.86.

Metcash, owner of IGA, Total Tools and Mitre 10, reported positive half-yearly results. Despite recording rising costs and weak performance in its hardware division, a strong rise in its food earnings saw group revenue increase 1.3 per cent to $7.8bn. Shares traded 1.1 per cent higher to $3.59.

IGA parent Metcash added. Picture: NCA NewsWire / Jeremy Piper

Shares in Liontown Resources added 0.4 per cent to $1.36. The lithium producer said it had secured a port services and access agreement with the Mid West ports authority in Western Australia.

Endeavour Group increased 1.8 per cent to $5.09 after UBS analysts upgraded the stock to a “buy” rating. Analysts said the concerns regarding the regulatory hurdles faced by the hotel and gaming operator were not as bad as anticipated.

Originally published as Australian share market rallies ahead of Reserve Bank December rates call