The Australian sharemarket ended Tuesday basically where it started, inching up just 3.7 points to 8917.70 after the Reserve Bank left interest rates unchanged. But don't pop the champagne — governor Michele Bullock made it clear more rate hikes are still on the table if inflation doesn't behave.
"We won't rule out further tightening in monetary policy, if that's what's required to bring inflation down," Bullock told reporters after the decision. The RBA board noted both underlying and headline inflation are still too high, even with oil prices easing and house prices dropping in some capital cities. Consumer spending is slowing, but that's not enough yet to convince the bank the job is done.
Stephen Smith, partner at Deloitte Access Economics, summed it up: "Today's decision reflects a central bank looking through a very cloudy outlook before deciding whether future meetings require more tightening, or simply more time." The Australian dollar slipped 0.3 per cent to US70.52¢.
Mining stocks were mixed after Monday's bumper session. BHP ended flat, Rio Tinto dropped 0.3 per cent, and Fortescue fell 1.3 per cent as copper and iron ore prices eased. But gold miners kept their golden run going — Northern Star added 2.5 per cent and Evolution Mining rose 1.2 per cent. The logic is simple: the peace deal raises hopes that the oil price shock will ease, which could lower inflation and reduce pressure on central banks to keep hiking. Higher rates are bad for gold because it doesn't pay interest.
Speaking of the peace deal — the US and Iran have agreed to reopen the Strait of Hormuz, which has been a choke point for global oil supplies. Iran confirmed the deal, but it doesn't include a final agreement on its nuclear program. Those talks are expected to drag on for another 60 days, leaving plenty of room for hiccups. Even if the strait fully reopens on Friday as expected, it'll take months for the energy industry to get back to full speed.
Wall Street didn't wait for the fine print. The S&P 500 jumped 1.7 per cent, the Dow climbed 468 points to a fresh record, and the Nasdaq soared 3.1 per cent. Airlines and cruise operators were instant winners — United Airlines flew 3.9 per cent higher, Royal Caribbean jumped 6.6 per cent. AI stocks also surged, with Micron Technology rallying 10.8 per cent and Advanced Micro Devices up 7 per cent. Nvidia, Wall Street's most valuable company, rose 3.5 per cent.
Back home, energy stocks advanced even as oil headed for its longest losing streak this year. Brent crude fell below US$83 a barrel, dropping for a fourth day, while West Texas Intermediate was near US$80. Leading Wall Street banks have cut their oil forecasts. But opinions differ on how quickly supply can actually be restored. Woodside Energy rose 2 per cent after Monday's slump, Santos added 0.8 per cent, and local refiners Ampol and Viva Energy edged up 0.4 and 1.4 per cent respectively.
Interest-rate-sensitive consumer discretionary stocks took a hit. Bunnings and Officeworks owner Wesfarmers dropped 1.1 per cent, and pokies maker Aristocrat lost 1.6 per cent. Financial stocks edged up — Commonwealth Bank inched up 0.1 per cent, Westpac and NAB rose 1.2 per cent each, and ANZ added 0.9 per cent. Tech stocks declined, with WiseTech slumping 4.2 per cent, Xero falling 1.7 per cent, and Technology One down 2 per cent.
Ulrike Hoffmann-Burchardi at UBS Chief Investment Office warned: "Volatility may persist in the near term as markets assess the implementation and durability of the deal." But she added that resilient growth and robust earnings should continue to drive stocks higher. For now, the market is taking a breath — waiting to see if this peace deal is the real deal or just another false dawn.