ASX climbs; big four banks pass on RBA rate rise

The sharemarket climbed on Tuesday after the Reserve Bank of Australia raised interest rates. It was a split decision by the board, suggesting borrowing costs may not climb as aggressively as some had feared.

The S&P/ASX 200 Index was flat for much of the session before the RBA lifted the cash rate by 0.25 basis points, with five members in favour of an increase and four against. The benchmark closed up by 30.90 points, or 0.4 per cent, at 8614.30, with six of the 11 sectors stronger.

The RBA warned that domestic inflation could be worsened by the conflict in the Middle East, which has driven up fuel prices. Traders are pricing in two rate rises by Christmas, compared to three rate rises priced in before the decision.

“We believe markets may be getting ahead of themselves when it comes to pricing the path for rates,” said VanEck head of investments Russel Chesler. “In our view, that outlook assumes oil prices remain structurally higher for an extended period, which may not materialise.”

The major banks were all higher, with the rate rise a tailwind for net interest margin. National Australia Bank, which was the first to pass on the rate increase, added 0.9 per cent to $47.46, and Westpac rose 1.4 per cent to $41.49.

Materials also rebounded from heavy selling on Monday as iron ore futures rose 1.2 per cent to $US108.75 in Singapore. BHP rallied 1.1 per cent to $49.73 and Fortescue 1.3 per cent to $19.95.

Gold miners climbed with gains in the precious metal to $US5033.93 an ounce. UBS has expanded its Australian gold coverage and slapped five stocks with new buy ratings.

Pantoro Gold surged 12 per cent to $3.82, Ora Banda Mining 9.1 per cent to $1.50, Catalyst Metals 7.6 per cent to $6.62 and Westgold 4.9 per cent to $6.24.

The energy sector had a more mixed session despite Brent crude climbing 2.7 per cent to $US102.91 a barrel by the close. Investors are weighing threats to supplies from the Iran war against attempts to ease a short-term crunch.

Santos rose 0.3 per cent to $7.71 while Woodside fell 0.7 per cent to $31.42. Coal miners, meanwhile, continued to slide after recent gains. New Hope lost 6.4 per cent to $4.96 as its half-year net profit of $54.3 million came in well off the $80 million expected by the market.

Meanwhile, rate-sensitive technology and retail stocks finished in the red. WiseTech Global dropped 3 per cent to $45.23, Xero 1.7 per cent to $77.62 and Kmart owner Wesfarmers lost 1.6 per cent to $75.44.

Stocks in focus

In company news, Pepper Money dived 14.9 per cent to $1.79 after Challenger lowered its takeover offer from $2.60 to $2.25, citing deteriorating market conditions and the operating environment. Challenger rose 3.5 per cent to $7.95.

Popular defence stock Electro Optic Systems plunged 17 per cent to $8.90 after revealing its chief executive, Andreas Schwer, planned to sell up to 2.5 million shares to build a “family home” and pay family expenses, including a divorce settlement.

PEXA Group rose 1.5 per cent to $15.33 after agreeing a deal to divest Informed Decisions (.id) to an unlisted buyer, continuing its planned exit from digital solutions.

And West African Resources rose 5.8 per cent to $2.94 as it reported a net profit of $567 million for 2025 on revenue of $1.54 billion.