Staff writers
Updated ,first published
The Australian sharemarket was down slightly on Tuesday afternoon as investors digested the Reserve Bank’s decision to raise the cash rate to a 15-year-high, with the bank’s board signalling there may be more pain to come for home owners.
The S&P/ASX 200 edged down about 2 points, or 0.02 per cent, to 8677.80 around 3.40pm AEST, after a 0.2 per cent rise on Monday. Energy, consumer staples and real estate stocks were the main drags on the bourse, with most other sectors flat. The Australian dollar was trading at US70¢.
At lunchtime, communications systems provider Codan was at the top of the bourse, lifting 21 per cent after a strong revenue and profit surge, followed by Megaport, up 12.4 per cent, leading the tech sector higher.
Iron ore and copper giant BHP, the largest stock on the ASX, gained 1 per cent, pushing the mining sector into the green.
But the big four banks were all lower ahead of the rate decision, falling between 0.2 per cent (National Australia Bank) and 1.1 per cent (Commonwealth Bank). Afterpay owner Block declined 3.2 per cent.
Energy stocks were also lower, led by another 9.5 per cent slump in Karoon Energy after it downgraded its oil production forecast on Monday following an electrical fault at a project in Brazil. Oil and gas giants Woodside and Santos were both down 1.8 per cent, and refiner Ampol lost 1.2 per cent.
Hearing implant maker Cochlear was down less than 1 per cent after it was hit with a shareholder class action suit in the Victorian Supreme Court over its 2026 profit forecast. In April, the company slashed that forecast, triggering a 40 per cent drop in its share price, which had been trading around $170. Cochlear, which was trading around $144 on Tuesday, is defending the claim.
The Reserve Bank’s nine-member policy board increased the cash rate by a quarter-percentage point to 4.6 per cent, the highest level since November 2011, on Tuesday.
The board’s decision was unanimous and came with a statement making clear rates could go even higher.
Ahead of the announcement, Belinda Allen, head of Australia economics at Commonwealth Bank of Australia, said: “The risk sits with the need to tighten monetary policy further beyond September given the inflation backdrop.
“But it is not an easy decision to push monetary policy further into restrictive territory.”
The central bank has stood pat at 4.35 per cent since May after opening the year aggressively, with rate rises at each of its first three meetings.
On Wall Street overnight, yields in the US bond market cranked up and again reached their highest levels in roughly two decades, which knocked stocks further from their record high.
The S&P 500 fell 0.8 per cent and gave back much of its gain from last week, which had brought it to the brink of its all-time high. The Dow Jones Industrial Average finished down 0.7 per cent, and the Nasdaq composite lost 0.9 per cent.
US stocks felt pressure as the yield on the 10-year Treasury jumped to 5.23 per cent from 5.17 per cent late on Friday. That’s a considerable move for the centrepiece of the US bond market, taking the 10-year yield back to where it was in 2007, before the global financial crisis sent yields towards zero.
Treasury yields have been jumping for a range of reasons, from worries about Washington’s massive debt load to rising energy costs from the Iran war, which boost inflation. That pressures the economy because it prompts higher interest rates, making borrowing money more expensive for everyone, while also undercutting prices for stocks and other investments.
Monday’s rise in yields followed the latest swings for oil prices, which have been yo-yoing on uncertainty about when the war with Iran will allow tankers to flow freely again through the Strait of Hormuz and deliver oil from the Middle East to customers worldwide.
The latest turns came after President Donald Trump over the weekend rejected an offer from Iran to reopen the Strait of Hormuz and resume talks on its nuclear program.
“I’d like to make a deal too,” Trump said Saturday. “But that deal would not be acceptable.”
West Texas Intermediate futures settled below $US93 a barrel, up 0.5 per cent, after a day of choppy trading, which saw prices rise by as much as 4.5 per cent during the session. It climbed above $US106 on Tuesday morning. Brent was up 0.9 per cent at $US106.21 a barrel.
Iranian officials have privately expressed pessimism about reaching a deal to end hostilities with Washington and reopen the Strait of Hormuz before US midterm elections in November. Trump is willing to give Iran sanctions relief and release frozen funds for concrete progress on the nuclear issue, according to a US official. Iran’s nuclear program is a key sticking point for both sides.
“Without a concrete deal or conclusion to the conflict, the market is quickly fading [on] initial headline reactions and higher prices are becoming harder to shake,” said Ryan McKay, senior commodity strategist at TD Securities. “The market is increasingly worried about escalation via Iran or the Houthis prior to midterm elections, or from the US post midterms.”
On Wall Street, shares of airlines and other companies with big fuel bills sank because of the rise in oil prices. American Airlines fell 2.5 per cent, and United Airlines lost 2.2 per cent.
Gold miners were also weak after the price of gold sank 3.9 per cent. Gold has a reputation for helping to protect its investors from high inflation, but its price tends to weaken when rising yields mean bonds are paying investors more in interest. Gold struggles to keep up because it pays its investors nothing.
Nvidia, Wall Street’s most influential stock, rose 1.7 per cent. The chip company said it approved a plan to send up to another $US150 billion to its shareholders in a stock buyback plan, bringing the program’s total remaining size to $US235 billion.
Nvidia has the power to do so after the frenzy around its chips used for artificial intelligence technology helped it more than double the amount of cash on its books in the first half of its fiscal year. The company also on Monday unveiled a new security platform that the chipmaker said can stop artificial intelligence agents from going rogue.
AI stocks have broadly come under pressure, after leaders said the industry needs to slow its development to give safety measures time to catch up.
In other international markets, European indexes were mixed following weaker performances across much of Asia. Indexes dropped 2.7 per cent in Seoul and 1.7 per cent in Shanghai for two of the world’s bigger moves.
With AP, Bloomberg
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Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: www.smh.com.au
