Shares fall after RBA flags easing support

·4-min read

A Reserve Bank decision to begin easing support for the economy has contributed to the biggest loss on the ASX in more than two weeks.

Shares fell steadily after the RBA on Tuesday made slight changes to its bond-buying and will not extend its three-year yield curve control target.

The cash rate remains at a record low 0.1 per cent.

Most share categories were lower and the benchmark S&P/ASX200 index closed down by 53.2 points, or 0.73 per cent, to 7261.8.

The All Ordinaries closed lower by 57.6 points, or 0.76 per cent, to 7531.4.

Energy shares were the only category with decent gains and rose 1.54 per cent.

Fidelity International investment specialist Anthony Doyle said the RBA had taken its first steps along the long road towards having normal policy measures.

The central bank has used unconventional measures such as quantitative easing to inject the economy with more cash than usual since the pandemic began last year.

Mr Doyle said by not extending one emergency measure - the three-year bond yield target of 0.1 per cent - the Reserve had signalled its growing confidence in the economy.

Low rates have helped investors boost share markets to record levels.

GSFM investment strategist Stephen Miller noted the RBA reaffirmed the cash rate would not rise before 2024.

Some central banks have recently brought forward estimates of rate hikes due to rising inflation.

Inflationary pressures were less visible in Australia, Mr Miller said.

Overall, the RBA's decisions were only a marginal retreat from high levels of support, he said.

The central bank will drop its bond buying in September from $5 billion per week to $4 billion per week.

Mr Doyle said conditions remained favourable for increases in equity prices.

The RBA decisions triggered an initial slide in the Aussie dollar, which then improved.

The Aussie rose to its highest level of the day, 75.99 US cents, at 1612 AEST.

Westpac head of financial markets strategy Robert Rennie cited the RBA's upbeat assessment of the Aussie economy as contributing to buying.

Overseas, there was less action than usual as Wall Street closed for the Independence Day holiday.

European stocks closed higher after signs of stronger than expected growth in the eurozone private sector.

On the ASX, retail magnate Solomon Lew called for the board of the troubled Myer chain to resign after his company increased its ownership.

Premier increased its stake in the department store business from about 10 per cent to 15.77 per cent.

Shares in Myer were higher by 14.86 per cent to 42 cents.

Shares in Premier were down 1.89 per cent to $27.05.

Energy stocks rose after OPEC and allies called off talks which might have increased oil supply.

Oil Search was up 4.62 per cent to $4.08.

Woodside gained 1.99 per cent to $24.07.

Westpac will sell its New Zealand life insurance business and said the sale will simplify the bank.

Westpac will sell the operations for $A373 million to insurer Fidelity Life Assurance Company.

The Kiwi company will sell life insurance products to Westpac New Zealand customers as part of a 15-year deal.

Shares in the bank were down 0.31 per cent to $25.45.

Westpac's peers in the big four were all lower by less than one per cent.

Big miners were mixed.

BHP gained 0.83 per cent to $48.85. Fortescue shed 1.39 per cent to $23.36. Rio Tinto decreased by 0.57 per cent to $125.41.

On Wednesday, gold and copper explorer Askari Metals will join the ASX.

The company recently raised $5.7 million and will have a market capitalisation on listing of $8.55 million.

The Australian dollar was buying 75.85 US cents at 1728 AEST, higher from 75.17 US cents at Monday's close.


* The benchmark S&P/ASX200 index closed down by 53.2 points, or 0.73 per cent, to 7261.8.

* The All Ordinaries closed lower by 57.6 points, or 0.76 per cent, to 7531.4.

* At 1728 AEST, the SPI200 futures index was lower by three points, or 0.04 per cent, to 7170.


One Australian dollar buys:

* 75.85 US cents, from 75.17 cents on Monday

* 84.07 Japanese yen, from 83.50 yen

* 63.80 Euro cents, from 63.43 cents

* 54.61 British pence, from 54.36 pence

* 106.92 NZ cents, from 107.08 cents.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting