ASX closes higher despite RBA rate rise; Qantas to offload Jetstar Japan stake

The Australian sharemarket closed higher on Tuesday, despite giving up some of its earlier gains, after the Reserve Bank raised official interest rates for the first time since 2023 and said inflation would remain outside its target band.

The S&P/ASX 200 gained 0.9 per cent or 78.5 points, after rising 1.2 per cent in early trade, to close at 8857.1. All sectors were in the green except for utilities, with mining and technology firms the strongest performers.

The Reserve Bank raised interest rates by 0.25 percentage points to 3.85 per cent, in a move that prompted a small retreat in the ASX200 and also sent the Australian dollar above US70¢ shortly after the decision.

A statement from the RBA board pointed to inflationary pressures building in the economy, and said the board had judged that inflation would probably remain above the bank’s 2 to 3 per cent target “for some time,” which made it appropriate to raise rates.

“While part of the pick-up in inflation is assessed to reflect temporary factors, it is evident that private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight,” the RBA board said.

Economists were divided over whether more interest rate hikes are likely this year. While National Australia Bank economists forecast another rate rise in May, ANZ Bank economists predicted Tuesday’s rate rise would dampen consumer spending growth and said it should be the only move from the RBA this year.

Mining stocks bounced higher, with gold miners Northern Star (up 1.1 per cent) and Evolution Mining (up 4.2 per cent) clawing back some of Monday’s heavy losses as gold and silver prices were again in focus overnight. Newmont Corporation jumped 5.6 per cent. Gold prices rose 1.8 per cent while silver prices climbed 5.9 per cent. BHP jumped 1.4 per cent while Rio Tinto surged 1.9 per cent and Fortescue climbed 0.5 per cent. South32 rose 2 per cent.

Financial stocks shed some early gains but remain solidly in the green, with Commonwealth Bank rising 1.1 per cent and Westpac up 1 per cent. National Australia Bank and ANZ Bank saw marginal gains. Macquarie Group rose 2.4 per cent.

Energy stocks were mixed as oil prices steadied after dropping more than 4 per cent overnight after US President Donald Trump told reporters that Iran is “seriously talking to us.” The prospect of improving relations between the two countries could keep oil flowing around the world. Woodside Energy edged up 0.6 per cent, Santos gained 0.4 per cent, and Yancoal rose 0.4 per cent.

In other news, Qantas said it would sell out of its share in Jetstar Japan, as the flagship Australian carrier directs its attention and capital to core businesses and routes.

The flagship carrier will offload its stake of Jetstar Japan to a Japanese buyer in order to “focus on ongoing capital investment” for both Qantas and Jetstar, it said in an update to the ASX.

The deal will see Qantas sell its 33.32 per cent shareholding to the Japanese government-owned Development Bank of Japan, Qantas said.

Qantas CEO Vanessa Hudson said: “We’re confident the new ownership structure will deliver greater value to customers, benefiting from the Development Bank of Japan’s domestic and international aviation knowledge and industry expertise.”

The announcement comes as Qantas prepares to undertake its Project Sunrise strategy, which will see the airline use specially designed Airbus A350s to connect Sydney to New York and London directly non-stop, on 20+ hour flights.

Jetstar Japan operates 27 aircraft in the A320 family, which fly from Tokyo and Osaka to other destinations in Japan. The disposal of the stake – for an undisclosed sum – will not impact any Qantas or Jetstar international services between Australia and Japan, nor will it affect JAL code share arrangements.

Japan has grown into a popular destination for Australians in recent years, helped by a weaker yen and a proliferation of skiing destinations.

Overnight, Elon Musk’s SpaceX acquired xAI, in a deal that encompasses the billionaire’s increasingly costly ambitions to dominate artificial intelligence and space exploration.

The transaction was announced in a statement on SpaceX’s website signed by Musk and confirming an earlier Bloomberg News report. The deal, which gives the combined company a valuation of $US1.25 trillion ($1.8 trillion), was announced to employees in a memo on Monday, Bloomberg News reported earlier.

On Wall Street, the S&P 500 added 0.5 per cent and snapped a three-day losing streak. The Dow Jones rose 515 points, or 1.1 per cent, and the Nasdaq composite gained 0.6 per cent.

Elsewhere, the US and India reached a trade agreement cutting tariffs on Indian goods, Donald Trump announced, de-escalating tensions between the two countries.

Trump said Monday that he would lower his 25 per cent tariff on Indian goods to 18 per cent after Prime Minister Narendra Modi agreed during a phone call to stop buying Russian oil.

On Wall Street, Sandisk leapt 15.4 per cent to lead the S&P 500. The data-storage company added to its 6.9 per cent gain from Friday, after it reported stronger profit for the latest quarter than analysts expected. It credited demand created by the artificial-intelligence boom, among other things. That helped offset a 2.9 per cent drop for Nvidia, whose chips are powering much of the world’s move into AI technology.

With AP

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