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Aussie shares rise 1% after interest rate cut

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The Australian share market finished one per cent higher as investors piled into equities after the Reserve Bank of Australia (RBA) cut the cash rate by a quarter of a percentage point.

At the close of trade on Tuesday, the benchmark S&P/ASX200 index was up 44.4 points, or one per cent, to 4,433.0, while the broader All Ordinaries index had risen 43.6 points, or one per cent, to 4,451.9.

On the ASX 24, the December share price index futures contract was 40 points higher at 4,434 with 25,402 contracts traded.

CommSec market analyst Steve Daghlian said the Australian share market was 0.69 per cent higher just before the the rate cut, and made further gains afterwards.

“The main driver was the Reserve Bank’s decision to cut rates for the first time since June,” Mr Daghlian said.

“The market was split ahead of this in terms of a likelihood of a rate cut and it came as a bit of a surprise to some.”

Resources companies led the gains, with global miner BHP Billiton finishing 42 cents higher at $33.54, and Rio Tinto climbing 62 cents to $53.98.

Fortescue Metals shares closed five cents higher at $3.54.

Fortescue shares were in a trading halt in the morning session before the High Court ruled that chairman Andrew Forrest and the company had not misled investors over the nature of agreements with three Chinese entities in 2004.

All the major banks were also higher.

ANZ shares added 20 cents to $24.99, Westpac posted a 22 cent gain to $25.16, while National Australia Bank rose 27 cents to $25.81.

Commonwealth Bank shares finished 19 cents higher at $56.04.

Qantas shares rose three cents to $1.22 after the airline said it had sold its 50 per cent stake in road freight operator StarTrack to Australia Post, and taken full ownership of air freight business Australian air Express.

Also on Tuesday, the High Court ruled against the airline’s fight to be exempt from paying $34 million in GST on unused flight bookings.

National turnover was 1.69 billion securities worth $3.55 billion, with 585 stocks up, 353 down and 343 unchanged.

At 1700 AEST the Sydney gold price was $US1,775.59, up $US9.01, from $US1,766.58 on Monday.