The local share market is rejoicing at the Reserve Bank's decision to keep rates on hold, despite comments foreshadowing future hikes.
The S&P/ASX200 was 10.5 points in the red before the 2.30pm AEST announcement sent it rocketing up 50.1 points, or 0.69 per cent, in the space of 15 minutes.
The benchmark index finished Tuesday up 32.9 points, or 0.45 per cent, to a two-week high of 7,279, while the broader All Ordinaries rose 36.1 points, or 0.49 per cent, to 7,478.9.
Investors are taking comfort in the belief the RBA is slowly winding down its tightening cycle, even though it likely has another hike in the tank before year's end, eToro market analyst Josh Gilbert says.
“The board was pleased with the progress of the monthly CPI reading last week but reaffirmed that inflation is still too high,” he said.
“The decision today points towards the economy weakening and the RBA’s clear worry over tipping Australia into a recession, with the board reiterating that the path to a soft landing is narrow.”
Reserve Bank governor Philip Lowe said in a statement keeping interest rates steady would give the board more time to assess the state of the economy.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve,” he said.
Key to the RBA’s next rates decision will be this month’s quarterly inflation readout, but other factors - including a red-hot labour market - will also be weighing on Dr Lowe's mind.
In good news for equities, there is now a strong chance the cash rate will peak below 4.6 per cent, Mr Gilbert believes.
Commonwealth Bank expects one more 25 basis point increase, while NAB anticipates two further hikes.
ANZ is sticking with its prediction of 4.6 per cent, but says Tuesday’s pause makes it more uncertain.
The big four banks went on a charge following the announcement, with CBA and NAB up 1.3 per cent and Westpac and ANZ 1.2 per cent higher.
Energy stocks were the biggest lifters of the day, up 1.2 per cent after Saudi Arabia prolonged its oil cut in an effort to keep a lid on supply, sending prices higher overnight.
Oil and gas giant Woodside climbed 1.4 per cent to $35.12, while Whitehaven Coal gained 2.4 per cent to $6.92.
The heavyweight miners all finished lower, with BHP losing 0.1 per cent, Fortescue Metals retreating 0.9 per cent and Rio Tinto down 1.2 per cent.
Fruit and vegetable grower Costa Group surged 12.1 per cent to $3.34 after confirming it had received a takeover offer from US private equity firm Paine Schwartz Partners at $3.50 per share.
Austal was another beneficiary of a North American buyout offer, up 12.9 per cent on reports JF Lehman & Company is preparing to lodge a bid for the navy shipbuilder.
Health insurer NIB climbed 3.4 per cent after its subsidiary Thrive acquired NDIS platform Kynd - a marketplace matching buyers and sellers of disability services.
Suncorp recovered from a slow start to end 0.6 per cent up after the group said it expects reinsurance costs to increase in 2023/24 due to recent catastrophic weather associated with La Nina.
Silver Lake Resources rallied 5.8 per cent after confirming gold sales of 83,540 ounces for the last quarter, in line with guidance.
Atomo shares rocketed up 130.6 per cent to a 12-month high of 8.3c. The rapid diagnostic test manufacturer is a critical supplier for Lumos Diagnostics' FebriDx test, which recently received regulatory approval in the US.
The Australian dollar was down against the major currencies, buying 66.52 US cents from 66.63 at Monday’s ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Tuesday up 32.9 points, or 0.45 per cent, at 7,279.
* The broader All Ordinaries rose 36.1 points, or 0.49 per cent, to 7,478.9.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.52 US cents, from 66.63 US cents at Monday’s ASX close
* 96.25 Japanese yen, from 96.34 Japanese yen
* 61.05 Euro cents, from 61.11 Euro cents
* 52.43 British pence, from 52.50 pence
* 108.18 NZ cents, from 108.48 NZ cents.
