The central bank sent the ASX higher after not budging from its historic low cash rate, while a $3bn cash splash on shareholders buoyed Boral.
The Australian sharemarket climbed higher after the Reserve Bank of Australia kept the cash rate at a historic low and decided to stop buying bonds, as expected.
The benchmark S&P/ASX200 index was up 0.44 per cent moments before the RBA decision, then jumped after the announcement, before settling back in late trade, closing 0.49 per cent higher at 7006.
The All Ordinaries Index finished 0.61 per cent stronger at 7312.8.
CommSec analyst Steven Daghlian said it had been quiet, cautious trade in the lead up to the RBA decision, following five falls over the past six trading days and the worst January in 14 years.
“Markets have very much been on edge recently because of concerns of interest rates rising this year,” Mr Daghlian said.
CommSec chief economist Craig James revealed CBA had joined Westpac in expecting the preconditions for a rate hike would be broadly met in August, also tipping a 15 basis point increase that month.
That view came despite the RBA saying it will be “patient” with rates, yet to be convinced wages will lift as expected and underlying inflation will remain in the 2-3 per cent band.
IG market analyst Kyle Rodda said the ASX200 “popped” after the meeting.
“Supply side pressures, the main driver of recent inflation, ought to ease, and with wages growth still sluggish, evidence of sustained inflation is not yet conclusive,” Mr Rodda said.
“Rightly or wrongly, the RBA sees no need to rush into rate hikes right now, even if it has scrapped its call that rates are unlikely to rise until the end of 2023 or 2024.”
OMG chief executive Ivan Tchourilov said the trading session started shakily, but managed to push into the green, with all sectors up except for materials.
Oil and gas exploration tiddler 88 Energy was the top gainer, rocketing 21.43 per cent to 5.1 cents.
“Oil is on track for its strongest January performance in three decades as Brent Crude pushed above US$91 a barrel,” Mr Tchourilov said.
BHP fell 3.06 per cent to $44.93, advising JPMorgan Chase had lifted its stake in the miner and confirming late on Monday it had detected a second Covid-19 case at one of its West Australian iron ore operations.
The corporate giant also confirmed to NCA NewsWire it had advised all but essential workers to leave its Perth office by midday WST and work from home as community spread persists in the city.
Rio Tinto backtracked 2.38 per cent to $108.90 and Fortescue dropped 0.7 per cent to $19.73.
“That’s because the iron ore price has fallen by about 4.2 per cent in the past day,” Mr Daghlian said.
“The Lunar New Year holidays are kicking off in parts of Asia this week, so it’s not surprising to see some of those unpredictable moves.
“But in the tail end of this week … we’re likely to not get much movement if any when it comes to iron ore prices.”
Gold miner St Barbara rose 6.12 per cent to $1.30, which Mr Tchourilov noted followed a poor start to the year, especially in the back half of January.
Building products company Boral jumped 5.79 per cent to $6.21 after announcing a $3bn return of surplus cash to shareholders after receiving proceeds from asset sales.
“On the 14th of February – Valentine’s Day – which I think is quite romantic,” Mr Daghlian said.
Disposable gloves and condoms maker Ansell continued to fall after issuing a profit warning on Monday, easing 0.34 per cent to $26.67.
“Mayne Pharma Group is up 6 per cent at 26.5 cents – welcome news for the pharmaceuticals company that, despite having a few strong sessions in January, generally trended downward,” Mr Tchourilov said.
Department store chain Myer dipped 1.14 per cent to 43.5 cents, following two sessions of gains, he noted.
Gig economy marketplace Airtasker surged 16.67 per cent to 84 cents, a day after reporting strong growth in the December quarter, but Freelancer slumped 10.16 per cent to 57.5 cents.
ANZ was unchanged at $26.53, Commonwealth Bank edged 0.2 per cent higher to $93.93, National Australia Bank rose 1.88 per cent to $27.64 and Westpac improved 0.49 per cent to $20.40.
The Aussie dollar was fetching 70.68 US cents, 52.52 British pence and 62.85 Euro cents in afternoon trade.
Originally published as RBA rates decision quells jitters, sends ASX notably higher before settling back in late trade
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