Share market climbs as Reserve Bank board convenes for rate discussion

Ahead of the central bank’s impending interest rate decisions, investors on the Australian share market were in an upbeat mood.

Australian shares started the week on a positive note, as interest rate sensitive real estate and tech stocks buoyed the benchmark on Monday.

At the closing bell, the S&P/ASX200 index rallied 0.7 per cent, or 53.4 points, to 7682.4, with eight of 11 industry sectors finishing in the green. Meanwhile, the broader All Ordinaries also advanced, climbing by a similar amount to 7952.3.

The Australian dollar was higher against the greenback, climbing to US66.14c at 4pm.

With attention firmly on Tuesday’s interest rate decision and the release of fresh RBA forecasts, RBC Capital Markets chief economist Su-Lin Ong said communications from the central bank would indicate a “very mild tightening bias”.

All eyes are on the Reserve Bank’s next interest rate decision and release of fresh staff forecasts. Picture: NCA NewsWire / Dylan Coker

“The RBA will need to see several more months of labour market and inflation data and any change in policy is unlikely for at least three months and probably closer to six months,” Ms Ong said.

“An RBA that emphasises patience, downplays recent inflation and labour market data preferring to await more data could temper the more hawkish forecast changes and rate hike discussion.”

Economists and investors almost unanimously expect the RBA to keep the official cash rate on hold at 4.35 per cent on Tuesday, with markets ascribing a roughly one in 20 chance of further tightening.

On the benchmark, real estate stocks were the best performing, rallying 1.7 per cent, with sector heavyweight Goodman Group surging 4.1 per cent to $33.98. Stockland added 0.9 per cent to $4.45.

Tech stocks also advanced, up 1 per cent. Wisetech added 2.2 per cent to $94.31 while NextDC jumped 3.1 per cent to $17.04.

Heavyweight miners also jumped, tracking gains in iron ore futures on the Singapore exchange which traded above $US119 a tonne. Fortescue led gains, up 2.6 per cent to $26.32, while BHP rose 0.8 per cent to $42.75 and Rio Tinto edged 0.3 per cent higher to $129.68.

Investors welcomed a $1bn increase to Westpac’s share buyback program alongside a special dividend. Picture: NCA NewsWire/Tertius Pickard

Financials were led by Westpac, which reported a 16 per cent decline in its first-half net profit as its margins came under intense pressure. Announcing a $1bn increase to its pre-existing share buyback program and a special dividend of 15c apiece, shares traded up 2.7 per cent to $27.12 at the closing bell.

Elsewhere in the sector, CBA climbed 1.2 per cent to $116.59, ANZ rose 1 per cent to $28.77 and NAB jumped 0.8 per cent to $34.66.

In other corporate news, Qantas shares edged up 0.3 per cent to $5.90. On Monday, the national carrier agreed to pay $120 m in penalties, settling a case that was brought against the airline by the Australian Competition and Consumer Commission for misleading customers.

Unveiling its quarterly results, shares in GrainCorp plunged 3.6 per cent to $8.11 on the back of falling commodity prices and increased competition. The company on Wednesday cut its forecast net profit after tax to between $60 million to $80 m.

Dan Murphy's and BWS parent Endeavour Group jumped 0.2 per cent to $5.24 despite reporting more subdued trading conditions. Retail sales in its bottle shops rose 2.4 per cent to $2.4bn, while sales in Endeavour’s 350 pubs climbed 1.5 per cent to $487 m.

Originally published as Share market climbs as Reserve Bank board convenes for rate discussion