Australian share market sinks following Reserve Bank rate hike

Despite the RBA hiking interest rates for the first time in five months, the ASX clawed back some of its earlier losses to finish slightly lower on Tuesday.

The Australian share market closed slightly lower on Tuesday with the benchmark clawing back early losses after the RBA deliver the first rate hike in five months.

The official cash rate now sits at 4.35 per cent, the highest level in 12 years, after new Governor Michele Bullock announced a 25 basis point hike.

The S & P/ASX200 sank 0.3 per cent, or 20.3 points, to finish at 6,997.1 points at the closing bell. Meanwhile, the All Ordinaries fared slightly better, easing 0.2 per cent lower to 7,176.6.

The Australian dollar is trading at US64.29c, down 0.93 per cent.

On the benchmark, five of 11 industry sectors finished in the green, led by a rally in tech stocks which finished 1.4 per cent higher.

The RBA’s 13th rate hike of the tightening cycle was in-line with market expectations. Picture: NCA NewsWire / Monique Harmer

Sector heavyweight Xero gained 1.1 per cent to $112.99, Wisetech added 2.6 per cent to $62.21 and Altium finished 1.5 per cent higher to $41.26.

Financials were the biggest laggard with all of the big four banks finishing in the red. Westpac lost 2.7 per cent to $21.33, ANZ dipped 1.1 per cent to $25.47, NAB sank 1 per cent to $29.04 and Commonwealth Bank fell 0.4 per cent to $100.01.

With economists split over the RBA’s next move, Westpac chief economist Luci Ellis – a former RBA assistant governor – said that while a December rate hike remained unlikely, a move higher in February was in play.

“There is not enough new information between now and the December meeting to drive a change in view,” she said

Former RBA assistant governor, now Westpac chief economist, Luci Ellis said a second hike in December was unlikely. Picture: NCA NewsWire, Monique Harmer

Ms Ellis said given the changes to the RBA’s inflation and unemployment forecasts, the central bank was likely to have even less tolerance for higher price pressures.

“While a December move is unlikely, it is more likely that [the] February meeting would become ‘live’ if the inflation outlook continues to lift,” she said.

In company news, takeover target Origin Energy rose 1.2 per cent to $8.64 after Institutional Shareholder Services recommended investor’s back Brookfield’s $US10.5bn ($16.3bn) bid for the electricity generator.

Money manager GQG Partners sank 1.8 per cent to $1.35 after it announced a fall of $US1.9bn ($AU3bn) in funds under management.