ASX bounces as traders trim interest rate rise bets

Australian shares have reversed an early loss to end higher after signs of economic pressure prompted a dovish repricing on the interest rate outlook. The S&P/ASX200 rose 53.8 points on Tuesday, up 0.

6 per cent to 8947.8, as the broader All Ordinaries gained 48.2 points, or 0.

53 per cent, to 9112. In a mostly hawkish speech to the Anika Foundation, Reserve Bank governor Michele Bullock noted that while demand growth was moderating as expected after three cash rate increases in 2026, housing and jobs market conditions had eased more steeply than predicted. Market expectations for another interest rate hike by year’s end were pushed out to March 2027, boosting local stocks with consumer cyclicals leading the charge, up 2.

7 per cent. “An interesting little arbitrary repricing there following the speech, probably helped along by the fall in oil prices this week, and it’s why consumer discretionary stocks have been the No.1 performer today,” IG market analyst Tony Sycamore said.

“Whether it turns out to be a false move ahead of tomorrow’s critical June quarter CPI (consumer price index) number remains to be seen.” The Australian rally came as indices in Asia dipped, with South Korea’s KOSPI tumbling more than 10 per cent while tech-heavy exchanges continued to unwind from their recent rallies. “The ASX200 is up in five of the past six sessions and its highest daily close in almost six weeks, continuing to benefit from its position as a low-beta safe haven,” Sycamore said.

The raw materials sector missed the party, tumbling 1.4 per cent as gold, copper and iron ore prices eased. Financials gained 0.

9 per cent as CommBank led the big four higher with a 1.5 per cent boost to $178.78, putting the segment within 2 per cent of April’s record high.

Energy stocks also rallied, with strong performances from Woodside and Santos despite oil prices hanging onto their recent losses as Brent crude traded below $US85 a barrel. Refinery operator Viva Energy rocketed more than 8 per cent higher after a strong quarterly update, eclipsing a decent gain from competitor Ampol. The moves came as the Albanese government announced a $4 million feasibility study to build a large-scale oil refinery in WA.

Elsewhere, consumer-facing stocks, health care, communications, IT stocks and real estate trusts also made solid gains. In company news, Harvey Norman and Latitude were ordered to pay $35 million and $20 million respectively after the Federal Court found a 2021-22 credit card promotion was misleading. Web Travel shares soared more than 17 per cent after announcing a $90 million share buyback on the back of strong earnings growth.

The Australian dollar was buying US69.71¢ on Tuesday afternoon, down from US70.06¢ on Monday at 5pm.

Overnight, the S&P 500 fell 0.2 per cent. The index is coming off two weekly losses in a row.

The Dow Jones rose 155 points, or 0.3 per cent. The Nasdaq composite fell 0.

4 per cent. Technology companies were behind much of the shifts on Wall Street, with gains and declines for a mix of big companies resulting in uncertain trading. Nvidia fell 5 per cent and Micron Technology slumped 2.

3 per cent. At the same time, Microsoft rose 1.9 per cent and Apple rose 1.

2 per cent. They are all among the most valuable companies in the world and those market values give them more influence over the direction of the broader market. The mix of gains and losses from a variety of those companies had more impact in pushing and pulling the market, even as most companies in the S&P 500 gained ground.

Wall Street has a busy week ahead with several potentially mark-moving updates on the economy and company earnings. The big focus will be on the Federal Reserve, which will give an update on Wednesday (US time) on its interest rate policy. The central bank has been grappling with the impact from rising inflation because of the ongoing US war with Iran.

It also has to contend with a fresh round of US-imposed tariffs globally, which could further worsen inflation. Trump overnight called on the Federal Reserve to lower interest rates, saying the US should have the lowest interest rate in the world. “Rates should be lowered...

We have other countries that are paying less interest rates,” Trump told reporters aboard Air Force One. “Kevin is fantastic, but he’s got a board, and the board members are very political,” Trump said, referring to Fed chair Kevin Warsh, adding he knew what Warsh wanted to do. Markets are expecting the central bank to stay on hold, with a 36 per cent chance of a rise.

The central bank has been holding rates steady throughout the year as it monitors inflation’s direction and impact, but Wall Street expects at least one rate hike by the end of the year. With AP, Bloomberg The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.

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