Asia report: Stocks rise after smaller-than-expected hike from RBA

Markets in Asia were in the green on Tuesday, with stocks in Australia well into the green after the country’s central bank revealed a smaller-than-expected hike to interest rates.

In Japan, the Nikkei 225 was up 2.96% at 26,992.21, as the yen weakened 0.13% against the dollar to last trade at JPY 144.74.

Robotics specialist Fanuc was up 2.84%, Uniqlo owner Fast Retailing added 2.02%, and tech investing giant SoftBank Group leapt 5.1%.

The broader Topix index was 3.21% firmer by the end of trading in Tokyo, settling at 11,906.89.

On the mainland, markets in Shanghai and Shenzhen were closed for a holiday, as were those in Hong Kong.

South Korea’s Kospi was 2.5% higher at 2,209.38, as the blue-chip technology stocks posted gains, with Samsung Electronics up 3.95% and SK Hynix 3.73% higher.

Oil prices were higher as the region went to bed, with Brent crude futures last up 0.46% on ICE at $89.27 per barrel, and West Texas Intermediate advancing 0.32% to $83.90 on NYMEX.

In Australia, the S&P/ASX 200 jumped 3.75% to 6,699.30, after the Reserve Bank of Australia tacked 25 basis points onto its cash rate, taking it to 2.6%.

Economists polled by Reuters had expected a 50 basis point rate rise.

The RBA said the rate hike would “help achieve a more sustainable balance of demand and supply”.

Sean Langcake, head of macroeconomic forecasting at Oxford Economics, said the RBA was “still uncomfortable” with where inflation sat.

“While they expect the normalisation of supply-side factors and lower commodity prices will help bring inflation down next year, they still believe more needs to be done to temper demand growth.

“The RBA's primary concern remains balancing the very tight labour market with households' response to higher rates.

“The unemployment rate is around its lowest level in 50 years and is expected to deliver faster wage growth in the near term.”

Langcake said a slowing in employment growth and even a slight rise in the unemployment rate would likely be seen as desirable for the RBA to help mitigate the risk of a breakout in wage-driven inflation.

“Against this, fast inflation and the substantial tightening of financial conditions that has already taken place is set to cause a marked slowing in consumption growth over the second half of 2022 and into 2023.

“With each rate rise, the risk of over-tightening grows.”

Across the Tasman Sea, New Zealand’s S&P/NZX 50 managed gains of 1.19% to 11,090.03, with medicinal cannabis firm Cannasouth jumping 4.9% after receiving its first shipment of cannabis.

The down under dollars were mixed against the greenback, with the Aussie last 0.18% weaker at AUD 1.5375, while the Kiwi strengthened 0.15% to NZD 1.7449.

Reporting by Josh White at Sharecast.com.