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Shares climb as Reserve Bank softens rate rise talk

The Australian share market has enjoyed a fourth consecutive session of positive trading after the Reserve Bank softened its wording on interest rates, indicating an end to rate rises might be in sight.

The benchmark S&P/ASX200 index jumped 41 points in the space of two minutes after the central bank's statement was released.

It finished Tuesday up 36.1 points, or 0.49 per cent, at 7,364.7, its highest level in two weeks.

The broader All Ordinaries rose 36.9 points, or 0.49 per cent, to 7,562.6.

While the Reserve Bank hiked rates by 25 basis points to 3.6 per cent as expected, the focus was on governor Philip Lowe's policy statement.

A change of wording in the crucial final paragraph, which dropped a specific reference to further increases in interest rates, was seized on by investors as a sign the RBA might leave rates steady after one more rise.

But Tiger Brokers Australia chief investment officer Brett Reynolds warned more rate hikes were likely and there was a strong possibility the rate would be above 4.5 per cent in the second half of the year.

"The story remains all about inflation," he said.

"It is still far above the RBA's target of 2-3 per cent and rates will continue to rise while this is the case."

But high commodity prices leave the local economy and share market in a strong position.

"Australia remains on track to avoid a recession, but it is a narrow track," Mr Reynolds said.

All sectors but mining finished up, with energy and consumer discretionaries closing more than 1.0 per cent higher.

BHP dragged down the index, with Australia's biggest miner dropping one per cent to $47.93.

Rio Tinto was also lower, down 0.3 per cent to $125, while Fortescue rose 1.4 per cent to $22.52.

The big banks all finished up on the back of the cash rate announcement.

Westpac climbed 1.3 per cent to $22.37, ANZ rose 1.2 per cent to $24.50, NAB grew 0.8 per cent to $29.71 and Australia's biggest bank, CBA, was up 0.3 per cent at $98.90.

Insurers Medibank and QBE jumped 2.4 and 2.3 per cent respectively, while financial services group Macquarie was up 1.6 per cent to $193.

The energy sector was the biggest winner of the day, up 1.2 per cent.

Santos finished 2.7 per cent higher at $7.33 after the gas producer announced engineering and design work were under way on its Papua LNG project.

Meanwhile, shares in InvoCare skyrocketed by over a third to $12.08 after the funerals business was targeted in a $1.8 billion takeover bid by private equity group TPG.

Department store chain Myer also gained strongly, up 9.8 per cent to 95.5c.

Downer EDI rose 3.3 per cent to $3.41 a day after non-executive director Peter Watson announced his resignation from the rail and mining contractor.

Bravura Solutions plunged 43 per cent to 39c after the software company raised $80 million through a share issue at a 53 per cent discount on its previous trading price.

The Australian dollar plunged to an 11-week low against its US counterpart after the RBA's announcement. It was buying 67.11 US cents, from 67.56 US cents at Monday's ASX close.


* The benchmark S&P/ASX200 index finished Tuesday up 36.1 points, or 0.49 per cent, at 7,364.7.

* The broader All Ordinaries dropped 36.9 points, or 0.49 per cent, to 7,562.6.


One Australian dollar buys:

* 67.11 US cents, from 67.56 US cents at Monday's ASX close

* 91.27 Japanese yen, from 91.70 Japanese yen

* 62.79 Euro cents, from 63.45 Euro cents

* 55.72 British pence, from 56.13 pence

* 108.18 NZ cents, from 108.74 NZ cents.