Australian shares jumped nearly 4% on Tuesday – their best session since June 2020 – after the country’s central bank gave markets a pleasant surprise with a cautious and smaller-than-expected 25bps rate hike.
The S&P/ASX 200 index settled 3.8% higher at 6,699.30, with all sectors finishing in positive territory.
“While inflation has yet to peak in Australia, the RBA’s (Reserve Bank of Australia) more cautious hiking pace indicates that it is prepared to wait for the effects of monetary policy tightening already enacted to emerge more fully,” Stephen Innes, managing partner at SPI Asset Management, said.
The RBA raised its cash rate by 25 basis points to a nine-year peak of 2.6%, saying they had already risen substantially, but added that further tightening would still be needed.
The latest rate hike is positive news for equities, said Azeem Sheriff, a market analyst at CMC Markets, adding that a short-term rally could be seen over the course of this month.
Financials soared 4.2% in their best day since June 2020, with the country’s “Big Four” banks adding between 4% and 5%.
Following the rate hike, National Australia Bank said it would raise home loan rates by 0.25% per annum.
Miners jumped 4.7% to mark their best session in more than two years. Sector behemoths BHP Group, Rio Tinto and Fortescue Metals Group rose between 1.7% and 3.8%.
Energy stocks ended 4.5% higher in their sixth consecutive session of gains on strong oil prices. Woodside Energy and Santos surged 4.9% and 4.2%, respectively.
In New Zealand, the benchmark S&P/NZX 50 closed 1.2% higher at 11,090.03, marking its best session since Aug. 30.
The country’s business confidence improved slightly in the third quarter amid signs that capacity pressures are starting to ease, a private think tank said.
- Reuters with additional editing by Jim Pollard