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Australian shares posted solid gains, after Wall Street recovered from its two-day losing streak as investors wait to see how aggressively the US Federal Reserve will lift interest rates this week.
Key points:
- The ASX 200 has dropped 2.9pc in the past five days
- The US Federal Reserve is expected to lift rates by at least 0.75pc
- Gold has fallen to a 29-month low
The ASX 200 rose 1.3 per cent, to close at 6,806 points.
The Australian dollar fell slightly to 67.2 US cents, by 4:35pm AEST.
In economic news, the Reserve Bank has released the minutes of its September meeting, which confirm it is poised to raise interest rates again as it battles to contain red-hot inflation.
However, the bank also said it sees a case for slowing the pace of hikes as rates approached more normal levels.
The RBA said its monetary policy was not on a pre-set path and would be balanced to try and keep the economy on an even keel.
"All else equal, members saw the case for a slower pace of increase in interest rates as becoming stronger as the level of the cash rate rises," the RBA minutes showed.
The central bank lifted its cash rate by 0.5 percentage points (to 2.35 per cent) at its September 6 meeting, its fifth hike in as many months.
Mining and banking boost
Many of Tuesday's best performers were resources stocks, including gold miner Ramelius Resources (+3 per cent), lithium companies Allkem (+4 per cent) and Pilbara Minerals (+3 per cent), Lynas Rare Earths (+4.9 per cent) and Nickel Industries (+4.7 per cent).
Shares of New Hope Corporation surged 8.8 per cent, after the coal miner revealed that its full-year profit jumped more than 1,000 per cent as a result of surging coal prices.
Fortescue Metals' share price fell by 0.9 per cent, after the miner said it will spend around $9.2 billion ($US6.2b) to install an additional 2-3 gigawatts of renewable energy generation and battery storage.
The company is aiming to stop using diesel and gas at its iron ore operations by the end of this decade.
In contrast, BHP and Rio Tinto saw their share price jump by 3.6 and 2.5 per cent respectively.
The big four banks provided a major boost to the market, with ANZ, Commonwealth Bank, Westpac and NAB up between 1.2 and 2 per cent each.
'We may be going in for a hard landing'
US markets rallied as hedge funds positioned themselves on the off-chance that the Fed's tone is less onerous than markets expect when policymakers raise rates on Wednesday.
"There's positioning going on just in case there's something that comes out of the Fed that proves to be less hawkish," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
"I don't think anyone is predicting that's going to happen, but it's positioning for the possibility of that. The majority of people are in the negative camp right now."
Wall Street's main indexes were volatile for most of the day, but managed to rebound in the final hour of trade.
The S&P 500 gained 0.7 per cent, to end at 3,900 points, the Nasdaq Composite rose 0.8 per cent to 11,535, while the Dow Jones index advanced 0.7 per cent to 31,023.
Markets are pricing in a rate hike of 0.75 percentage point, with futures showing an 18 per cent chance of 1 percentage point increase on Wednesday (local time), according to CME's FedWatch Tool.
Markets also indicate a real chance that rates could hit 4.5 per cent by March as the Fed is forced to tip the economy into a recession to subdue inflation
"Our biggest concern now, and the reason why you're seeing such choppiness in the market today, is that there's more uncertainty about earnings now, in addition to the concern over [US] rate hikes," said King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco.
"We may be going in for a hard landing rather than a soft landing, and the hard landing being the Fed perhaps over-tightening in a situation where we're already seeing the economy decelerate."
Worldwide rate hikes
At least 10 central banks are meeting this week — from Switzerland to South Africa — and most of them are expected to raise interest rates.
Economists are split on whether the Bank of England will move by 0.5 or 0.75 percentage points.
But China's central bank cut a repurchase rate by 0.1 percentage points on Monday to support its ailing economy.
The other exception is the Bank of Japan, also due to meet this week, and which has shown no sign of abandoning its ultra-easy yield curve policy despite a drastic slide in the yen.
Central banks in Norway, Sweden, Indonesia, Taiwan, the Philippines, Turkey and Brazil are also meeting this week to discuss interest rate policy.
Oil prices edged up in volatile trading as worries of tight supplies outweighed fears that global demand could slow due to a stronger US dollar and possibly large rate increases by the Fed.
Brent crude rose 0.4 per cent to $US91.74 a barrel.
Spot gold was flat at $US1,675.48 an ounce, near its lowest level in 29 months.
Bitcoin, which also moves in line with investors' risk appetite, hit a three-month low of $US18,271 and was last steady at $19,537.
ABC/Reuters