Australian shares rise as RBA says it is in no hurry to hike rates

Australian shares rose on Tuesday, as the central bank held its cash rate at a record low and pushed back on market wagers for an early rate hike while ending its bond buying programme.

The S&P/ASX 200 index closed 0.5 per cent higher at 7,006, helped by gains in banking and gold stocks. It fell about 6.4 per cent in January, marking its biggest monthly drop since March 2020.

The Reserve Bank of Australia kept its cash rate at a record low of 0.1 per cent and said the last bond purchase under its A$275 billion ($194.48 billion) bond buying campaign would take place on Feb. 10.

The central bank emphasised that an end to quantitative easing did not signal a near-term rate hike, and it was prepared to wait until inflation picked up.

Banks closed 1.2 per cent higher as the central bank brought no last-minute surprises, with three of the "Big Four" banks advancing between 0.2 per cent and 1.9 per cent, while Australia and New Zealand Banking Group closed flat.

"It seems that banks have to wait a little longer for a recovery in their lending margins. At the same time, one cannot guarantee that a rise in short-term interest rates will deliver a much-needed bounce to the margins" said Kunal Sawhney, chief executive of Kalkine Group.

Gold stocks rose 2.6 per cent after shedding 11.8 per cent in January. Newcrest Mining surged as much as 3.5 per cent, while Northern Star added 2.2 per cent.

Miners, however, lost 1.3 per cent, with BHP Group declining 3.1 per cent.

Building materials maker Boral Ltd advanced 5.8 per cent after saying it would return A$3 billion to shareholders, using mostly proceeds from the sale of several North American businesses.

New Zealand's benchmark S&P/NZX 50 index rose 1.4 per cent to 12,058.94 in its best session since early December 2021. ($1 = 1.4140 Australian dollars)