Shares advance as Reserve Bank keeps cash rate steady

Snapping a two-day losing streak, the sharemarket rallied on Tuesday, propelled by financial and utilities stocks.

Propelled by a rally on Wall Street and an extension of the RBA’s hold on interest rates, the share market advanced on Tuesday. Picture: NewsWire / Gaye Gerard

Australian shares advanced on Tuesday following a strong lead from Wall Street and an extension of the Reserve Bank’s rate hold into its seventh straight month.

At the closing bell, the benchmark index, the S&P/ASX200 advanced 1 per cent, or 77.8 points, to reach 7778.1, with all 11 industry sectors in the green.

The broader All Ordinaries also climbed, albeit more modestly, adding 0.9 per cent to 8015.8.

The Australian dollar finished higher, buying US66.2c against the greenback at 5.30pm.

In a move that was widely expected by economists and investors, the RBA kept the cash rate on hold at a 12-year high of 4.35 per cent on Tuesday.

Investors, however, shrugged off the addition of a more hawkish line to the statement, in which the board warned it would do “what is necessary” to return inflation back towards its 2 to 3 per cent target band.

RBA governor Michele Bullock warned that the central bank would do what was necessary to return inflation to target. Picture: NewsWire / Nikki Short

Responding to the statement, Betashares chief economist David Bassanese said the central bank’s August meeting was a “live event”, arguing that the RBA could move to raise rates if the June quarter inflation reading was ”disappointingly high”.

“The key issue will be how the balance of data over coming weeks influences the RBA’s updated set of inflation forecasts in early August,” Mr Bassanese said.

“If in August the RBA feels the need to upgrade its longer-term forecasts … it may feel compelled to raise rates at the August policy meeting.”

Meanwhile on Wall Street, technology stocks propelled the US sharemarket to fresh highs, with the S&P500 adding 0.8 per cent and the tech-heavy Nasdaq composite climbing 1 per cent, both resetting their records. The Dow Jones was 1 per cent higher.

On the local benchmark, financial stocks helped buoy the index, adding 1.6 per cent. Sector heavyweight Commonwealth Bank reset its record after climbing 2 per cent to $127.98, while NAB added 2.1 per cent to $36, ANZ rallied 1.5 per cent to $29.24, and Westpac rose 0.9 per cent to $27.22.

Materials stocks were the worst performing, up just 0.1 per cent. Picture: Supplied.

Utilities stocks also posted strong gains, up 2.4 per cent, as Origin shares jumped 3.5 per cent to $10.41 while AGL Energy advanced 1.7 per cent to $10.42.

The materials sector was the worst performing, up just 0.1 per cent, as iron ore heavyweight Fortescue plunged 5.2 per cent to $21.79 after an institutional investor sold a $1.1bn stake in a block trade after Monday’s session ended. Fortescue was the benchmark’s worst performer.

Fellow iron ore mining heavyweights grained with Rio Tinto up 0.9 per cent to $119.26 while BHP added 0.6 per cent to $42.80.

In corporate news, gas explorer Tamboran Resources launched it initial public offering on the New York Stock Exchange, valuing its shares at $US24-27 a piece. On the ASX, shares were placed in a trading halt having last traded at 19c.

Beach Energy skidded 2.2 per cent to $1.53 forecast production of between 17.5 million and 21.5 million barrels of oil equivalent per day for the full year. The oil and gas producer also announced the outcomes of its strategic review, vowing to slash spending and cut jobs.

Originally published as Shares advance as Reserve Bank keeps cash rate steady