ASX trims gains as Bullock signals more rate hikes possible

The Australian sharemarket closed higher on Tuesday, buoyed by a rebound in the gold price and despite paring losses after the Reserve Bank of Australia unanimously voted to lift borrowing costs for the first time since 2023.

The S&P/ASX 200 Index rose 78.5 points, or 0.9 per cent, to 8,870.60, with 10 of 11 sectors finishing in positive territory as the market rebounded from Monday’s 90-point loss that was spooked by heavy selling in precious metals.

The sharemarket had climbed as much as 1.1 per cent during the session on Tuesday before paring gains after the RBA raised the cash rate by a 0.25 of a percentage point to 3.85 per cent and forecast inflation would not return to target anytime soon, suggesting more rate increases could be on the table.

The unanimous decision by all nine members of the RBA board pushed the dollar up 0.8 per cent to US70.09c.

Betashares chief economist David Bassanese said there was little indication that Tuesday’s rate increase would be a one-off. Speaking at the press conference on Tuesday, RBA Governor Michele Bullock also did not rule out further increases.

“It’s hard to avoid the conclusion that the RBA has in mind at least one more rate hike – consistent with current market pricing – because even under this scenario inflation is expected to remain uncomfortably high for the foreseeable future,” he said.

On the ASX, it was the mining sector that underpinned the market as gold rebounded from its biggest slump in over a decade, with prices up 3.2 per cent to $US4815 an ounce at the close. Newmont rose 5.6 per cent to $164.75, Evolution Mining 4.2 per cent to $14.46 and Genesis Minerals 1.9 per cent to $7.10.

Banks were also higher as Morgan Stanley said that a higher cash rate would help net interest margins. Commonwealth Bank added 1.1 per cent to $153.08, despite also flagging a $68 million pre-tax provision. Westpac added 1 per cent to $39.32, while National Australia Bank and ANZ were both up less than 1 per cent to $43.04 and $36.78, respectively.

The usually rate sensitive tech sector had the strongest gains as WiseTech Global rose 1.7 per cent to $57.38, NextDC 1.9 per cent to $13.26 and Xero by 2.6 per cent to $96.10 on news its Melio product was expected to become profitable ahead of expectations.

Stocks in focus

In other corporate news, Neuren Pharmaceuticals tumbled 10 per cent to $14.63 after its licensee Acadia Pharmaceuticals received a “negative trend vote” from European regulators on its application to market a treatment for Rett syndrome.

Qantas rose 0.3 per cent to $10.20 amid news it reached a deal with Japan Airlines to move Jetstar Japan to a new Japanese capital-led ownership structure, paving the way for the airline to exit its minority stake.

Mining contractor NRW Holdings gained 4.8 per cent to $5.42 after it won three new civil contracts worth a combined $270 million, strengthening its pipeline in Western Australia and the Pilbara.

Telix Pharmaceuticals slid 2.6 per cent to $10.21 after its chairwoman Tiffany Olson resigned after just eight months in the role.

And debt collection company Credit Corp dived 16.7 per cent to $11.89 after first-half results disappointed market expectations. Morgans said the report was a mixed bag with US purchasing guidance lowered.