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The share market firmed ahead of an afternoon interest rate announcement as gains in resource and tech stocks outweighed declines in banks and defensive assets.

The S&P/ASX 200 climbed eight points or 0.14 per cent by mid-session.

The Reserve Bank met this morning and was due to announce the new cash rate target at 2.30 pm AEST. The consensus among economists was for a 50 basis-point  increase in the interest rate benchmark to 1.35 per cent.

What’s driving the market

The market briefly dipped before overcoming the dulling effect of a US market holiday and the prospect of a third rate hike in three months. Today’s advance added to a 73-point bounce in the ASX 200 yesterday.

A rebound in US equity futures sharpened buying interest. S&P 500 futures reversed overnight weakness, rising 15.5 points or 0.4 per cent following gains in much of Europe. The pan-European Stoxx 600 index put on 0.54 per cent as energy producers set the pace.

Also helping sentiment was news of a strong recovery in Chinese business activity as Covid restrictions were lifted. Caixin’s composite purchasing managers’ index jumped to 55.3 last month from a May reading of 42.2. Readings above 50 indicate expanding activity. Iron ore prices in China bounced 0.6 per cent after the announcement.

RBA Governor Philip Lowe indicated two weeks ago that today’s RBA decision would likely hinge on whether to hike by 25 or 50 points. A majority of economists expect the central bank to lift by 50 points for the second month in a row. CBA, Westpac, ANZ and NAB all predicted an increase to 1.35 per cent.

“The Governor will likely refer to the increase in the 2022/23 minimum wage of 5.2 per cent and the RBA’s recent upward revision to their assessment of the near term inflation outlook as justification for a consecutive 50 basis point rate increase,” CBA economists wrote.

Trading volumes have tailed off over the last few sessions as Wall Street wound down for the July 4 long weekend and investors awaited fresh catalysts. Activity yesterday on the ASX was the weakest in nearly a month.

Going up

Energy producers shone for a second day as a looming strike among oil workers in Norway and a production miss by the OPEC+ oil group lifted energy prices. Woodside Energy gained 4.16 per cent. Santos firmed 2.08 per cent. Beach Energy added 1.29 per cent.

Tech stocks were another pocket of strength. BrainChip jumped 7.06 per cent, Life360 4.47 per cent and WiseTech 2.66 per cent.

A record quarter lifted Regis Resources 10 per cent. Quarterly production of 123,901 ounces of gold capped a record year for the miner. Annual production was 437,000 ounces.

Westgold improved 3.69 per cent after meeting full-year production guidance. Managing Director Wayne Bramwell described the fourth quarter as “cracking”.

Other gold miners to rise included St Barbara +5.76 per cent, Gold Road Resources +3.11 per cent and Silver Lake +3.1 per cent.

Bubs Australia entered a trading halt as the infant formula manufacturer took advantage of recent strength in the share price by raising capital. The firm was seeking to raise $63 million by issuing shares at 52 cents, an 18.8 per cent discount to yesterday’s close. Funds raised will be used to support the company’s rapid expansion following a formula shortage in the US.

Going down

The big four banks were the biggest drag amid concerns about the impact of higher rates on bad debts. ANZ retreated 1.26 per cent, Westpac 0.36 per cent, NAB 0.68 per cent and CBA 0.47 per cent.

New lender Judo Bank dipped 1.97 per cent despite beating its FY22 prospectus target of $6 billion in loans and advances. The firm’s closing balance at June 30 was $6.09 billion.

Demand for bond proxies was dulled by a rise in bond yields. The yield on ten-year Australian government bonds rose almost seven basis points this morning to 3.63 per cent.

Mirvac dropped 2.3 per cent, Stockland 2.28 per cent and HomeCo Daily Needs 2.26 per cent.

Rate-sensitive travel stocks also retreated. Corporate Travel Management shed 0.94 per cent. Flight Centre declined 0.57 per cent.

Other markets

Asian markets rose in unison. The Asia Dow gained 0.35 per cent. China’s Shanghai Composite tacked on 0.26 per cent, Hong Kong’s Hang Seng 0.95 per cent and Japan’s Nikkei 0.94 per cent.

Oil added to overnight gains. Brent crude rallied 73 US cents or 0.6 per cent to US$114.23 a barrel.

Gold was ahead US$9.70 or 0.5 per cent at US$1,811.20 an ounce.

The dollar rose 0.08 per cent to 68.76 US cents.

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