RBA interest rate hold prompts stock upswing

The domestic stock market has rallied after the Reserve Bank left interest rates on hold and was not as hawkish as some had feared about potentially raising them in future to combat stubborn inflation.

The benchmark S&P/ASX200 index closed on Tuesday up 110.9 points, or 1.44 per cent, to 7,793.3, while the broader All Ordinaries gained 113.2 points, or 1.42 per cent, to 8,065.5.

The market was already in the green but climbed further after the Reserve Bank left interest rates unchanged and maintained its neutral outlook for the future rather than revert to a tightening bias.

The RBA board said in a statement it "expects that it will be some time yet before inflation is sustainably in the target range and will remain vigilant to upside risks," adding that it was "not ruling anything in or out".

NAB's head of market economics, Tapas Strickland, said the lack of an explicit bias towards rate hikes was surprising, given recent data showing inflation was still a problem.

"If we really think inflation is going to be persistent and significantly above our forecasts, we will tighten again," RBA governor Michele Bullock told reporters after the decision.

GSFM investment strategist Stephen Miller said any rate cuts this year were a remote possibility, as inflation remained higher than desired and the prospect of a long-term pause on interest rates was likely.

"We would have to see inflation seriously stall for the RBA to reignite its hiking bias from here," said Josh Gilbert, market analyst at eToro.

The market accelerated its gains following the news, with all sectors on the ASX finishing up over one per cent. Utilities climbed the most, rising 2.8 per cent.

In the financial sector, ANZ was in the red for much of the day after the big bank announced its half-year profit was down four per cent to $3.4 billion, compared to the second half of 2023.

Banking analyst Azib Khan of E&P Capital said the results were largely due to higher than expected costs, with revenue broadly in line with expectations.

An interim dividend of 83 cents per share was to follow as ANZ chief executive Shayne Elliott said the group had saved $200 million in costs through productivity measures.

ANZ ultimately finished up 0.1 per cent at $28.79, while Westpac gained 2.8 per cent to $27.89 and CBA added 2.1 per cent to $119. NAB posted the sole fall out of the big four, with a loss of 1.5 per cent to $34.14.

AGL rose 6.2 per cent after the power retailer raised its earnings guidance for 2023/24, with an after-tax profit expected of around $785 million, up from a previous forecast of $740 million.

In the heavyweight mining sector, Rio Tinto and BHP both gained 1.6 per cent, to $131.71 and $43.42, respectively, while Fortescue rose 1.8 per cent to $26.78.

Sims Limited dropped 6.4 per cent to $11.06 as the metal recycling company announced its second half expected earnings would be marginally lower as lower domestic and international demand for scrap metal had resulted in lower prices.

Metallurgical coal suppliers Coronado Global Resources and Vulcan Steel were also down 1.7 per cent and 1.5 per cent, respectively.

The Australian dollar was buying 65.91 US cents, from 66.22 at Monday's ASX close.

ON THE ASX:

* The benchmark S&P/ASX200 index finished Tuesday up 110.9 points, or 1.44 per cent, at 7,793.3

* The broader All Ordinaries rose 113.2 points, or 1.42 per cent, to 8,065.5

CURRENCY SNAPSHOT:

One Australian dollar buys:

* 65.91 US cents, from 66.22 US cents at Monday's ASX close

* 101.88 Japanese yen, from 101.78 Japanese yen

* 61.27 Euro cents, from 61.52 Euro cents

* 52.55 British pence, from 52.70 pence

* 109.81 NZ cents, from 110.10 NZ cents.