ASX gains 0.7pct ahead of RBA meeting

·4-min read

The Australian share market has shaken off fears of a slowdown in China to finish higher for the fifth day in a row, ahead of the Reserve Bank's latest expected hike in the cash rate.

The benchmark S&P/ASX200 on Monday finished up 47.8 points, or 0.69 per cent, to 6,993.0, while the broader All Ordinaries climbed 39.2 points, or 0.55 per cent, to 7,213.0.

"Stronger than I would have thought, given what the headlines were over the weekend with regard to China and also ahead of the RBA's meeting," City Index analyst Tony Sycamore said, referring to Sunday's announcement of an unexpected contraction in China's factory activity reported for July.

Mr Sycamore told AAP last week's release of cooler-than-expected Australian inflation data had eased fears the Reserve Bank of Australia might on Tuesday opt for a 75 or 65 basis point increase in the cash rate, and that market was now pricing in a 40 basis point hike.

That means a rate hike of just 25 basis points (0.25 percentage points) is on the table, he said.

"If they do decide to go 25 basis points, well, strap in, because the ASX200 would love that - the fact that they've not gone for their third consecutive 50 basis point rate hike.

"But I don't think that's going to happen. We know from the minutes of the last RBA meeting that they do want to get the cash rate back to neutral. They need to go by 50 basis points tomorrow."

Mr Sycamore called Tuesday's session "a bit of a make or break session for the ASX200," which is currently coiled right below the 7,000 mark, its highest level since June 10.

Monday's gains were also remarkable because of the "shocking" decline in house prices, with data from CoreLogic released on Monday showing the biggest monthly drop in July since 1983, Mr Sycamore added.

"So this does say to me that this wasn't a movement based on fundamentals - it was movement based on people that missed out (on July's gains). There'a a little bit of FOMO in the market now, and they're putting cash to work."

The utilities sector was the biggest gainer on Monday, rising 1.95 per cent, with energy close behind with a 1.94 per cent gain ahead of Wednesday's OPEC+ meeting.

Woodside Energy gained 2.7 per cent to $32.84 and Santos was up 1.1 per cent to $7.38.

Tech and consumer discretionary shares lost ground, and property was flat.

The heavyweight mining sector added 0.9 per cent, with BHP up 1.1 per cent to $39.10 and Rio adding 1.1 per cent to $98.92.

Supermarket giant Woolworths added 1.7 per cent to $38.17 and telecom Telstra gained 2.1 per cent to $3.97.

The big banks were mixed, with Westpac up 0.7 per cent to $21.66 and CBA adding 0.3 per cent to $101.08, while NAB dipped 0.1 per cent to $30.58 and ANZ dropped 0.7 per cent to $22.74.

United Malt Group plunged 17.2 per cent to a two-year low of $3.04 after the maltster announced its full-year earnings would miss guidance because of a poor North American crop of barley; continued supply chain disruptions; and higher than expected energy costs.

Aussie Broadband dropped 16 per cent to $3.05 despite the telecom announcing full-year earnings would be at the top end of guidance at $38 million to $39 million.

Pacific Edge fell 33.3 per cent to an all-time low of 44c, after potential troubles emerged about gaining Medicare reimbursement in the United States for the Kiwi cancer diagnostic company's urine test for bladder cancer.

The Australian dollar meanwhile cooled after late last week hitting a seven-week high against the greenback. The Aussie was buying 70.10 US cents, from 70.23 US cents on Friday.

ON THE ASX:

* The benchmark S&P/ASX200 index on Monday closed up 47.8 points, or 0.69 per cent, at 6,993.

* The All Ordinaries climbed 39.2 points, or 0.55 per cent, to 7,213.0.

CURRENCY SNAPSHOT:

One Australian dollar buys:

* 70.10 US cents, from 70.23 US cents at Friday's close

* 92.74 Japanese yen, from 93.23 yen

* 68.51 Euro cents, from 68.59 cents

* 57.51 British pence, from 57.48 pence

* 111.18 NZ cents, from 111.14 cents.

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