Aussie shares hit three-week low after RBA hikes rates

Derek Rose |

The local share market has dropped to its lowest level in more than three weeks after the Reserve Bank announced its 11th interest rate hike in the past 12 board meetings.

The benchmark S&P/ASX200 index on Tuesday plunged 0.8 per cent in the three minutes after the central bank’s announcement to finish down 67.2 points, or 0.92 per cent, at 7,267.4.

The broader All Ordinaries dropped 64.4 points, or 0.86 per cent, to 7,459.8.

While a number of economists had predicted the Reserve Bank would raise rates, the ASX’s futures market had assigned a zero per cent probability the central bank would raise rates.

But of course it did, and the RBA’s accompanying commentary indicated more hikes were still possible.

“The market was hoping for flat from here on, so it does mean a bit more pressure for the market, and for consumer companies as well,” Tribeca Investment Partners portfolio manager Jun Bei Liu told AAP.

RBA governor Philip Lowe reiterated on Tuesday night that further hikes might be needed to ensure inflation returns to target in a reasonable time frame, but it would depend on how the economy and inflation evolve.

“The board is not on a pre-set course,” he told the RBA’s board dinner in Perth.

“It will continue to pay close attention to developments in the global economy, trends in household spending and the outlook inflation and the labour market.

“Once again, we will do what is necessary to bring inflation back to target.”

Every ASX sector finished lower on Tuesday except for tech, which was flat. 

The interest-rate-sensitive property sector was the biggest loser, falling 2.2 per cent with Westfields owner Scentre Group, office tower owner Dexus and property developer Stockland all down between 2.4 and 2.9 per cent.

The heavyweight mining sector dropped 1.0 per cent with BHP falling 1.2 per cent to $43.63 as the Big Australian wrapped up its takeover of OZ Minerals, and Rio Tinto fell 1.0 per cent to $111.14.

In consumer staples, Endeavour Group sunk 3.6 per cent to $6.53 after the BWS and Dan Murphy’s owner announced third-quarter group sales had risen 3.7 per cent to $2.83 billion.

Managing director and CEO Steve Donohue called it a “solid sales result” across both retail and hotels.

Woolworths dropped 0.8 per cent to $38.58 after the supermarket giant announced third-quarter group sales rose 8.0 per cent to $16.4 billion but food price inflation remained a concern.

“The company’s share price has done so well, it’s actually falling on the back of what is very, very strong results,” Ms Liu said of Woolworths shares, which remain up 15 per cent since the start of the year.

Qantas fell 3.0 per cent to $6.54 after the airline announced that longtime CEO Alan Joyce would retire in six months’ time. He’ll be replaced by chief financial officer Vanessa Hudson.

“The new appointment’s actually very solid – Vanessa’s been with the business for 28 years,” Ms Bei Liu said.

The big banks were mostly slightly lower, except for Westpac which was basically flat at $22.55.

ANZ dropped 0.4 per cent to $24.42, and NAB and CBA both dipped 0.3 per cent, to $29.09 and $100.10, respectively.

Cleanaway Waste gained 5.8 per cent to a two-month high of $2.56 following a presentation to the Macquarie Conference, while Mirvac dropped 4.2 per cent to $2.28 and Wesfarmers dropped 1.3 per cent to $51.36 following their own presentations.

The Australian dollar meanwhile climbed to a week-and-a-half high against the greenback following the rate hike. The Aussie was buying 67.06 US cents, from 66.41 US cents at Monday’s ASX close.

Looking forward, attention now turns to the Federal Reserve decision due in the pre-dawn hours on Thursday, Australia time. 

The CME FedWatch Tool on Tuesday evening was predicting a 91.5 per cent chance the Fed would hike rates and a 8.5 per cent chance of a pause.


* The benchmark S&P/ASX200 index finished Tuesday down 67.2 points, or 0.92 per cent, at 7,267.4

* The broader All Ordinaries dropped 64.4 points, or 0.86 per cent, to 7,459.8


One Australian dollar buys:

* 67.07 US cents, from 66.41 US cents at Monday’s ASX close

* 92.31 Japanese yen, from 88.60 Japanese yen

* 60.99 Euro cents, from 59.59 Euro cents

* 53.64 British pence, from 53.10 British pence

* 108.20 NZ cents, from 107.81 NZ cents.