ASX finishes in the red after RBA keeps rates on hold; TPG shares fall

The Australian sharemarket extended losses after the Reserve Bank held interest rates steady on Tuesday afternoon and hinted at possible rate hikes next year, saying recent economic data suggested “the risks to inflation have tilted to the upside”.

The S&P/ASX 200 ended down 38.5 points, or 0.5 per cent, at 8585.90, with all of its 11 industry sectors in the red. The local bourse edged down 0.1 per cent on Monday. The Australian dollar strengthened 0.3 per cent to US66.46¢ as of 4.30pm AEDT.

Speaking to reporters after the rate decision, Reserve Bank Governor Michele Bullock said that while the central bank did not explicitly consider an interest rate hike at its meeting, it had started turning its mind to a rate rise.

“I don’t think there are interest rate cuts in the horizon for the foreseeable future,” Bullock said. “The question is, it just an extended hold from here, or is it possibility of a rate rise? I couldn’t put a probability on those, but I think they’re the two things that the board will be looking closely at coming into the new year.”

Financial markets had widely expected rates to stay at 3.6 per cent, and the rate call was a unanimous decision by the RBA board.

Investors have priced in one rate rise over 2026 after a report showed inflation rose to 3.8 per cent in the year to October, up from 3.6 per cent in September and above the inflation range of 2 to 3 per cent targeted by the RBA. While lower rates can give the economy and share prices a boost, their downside is that they can worsen inflation.

“If inflation bottoms above the 2.5 per cent target and the economy continues to strengthen, the implications are quite clear: the board will have no option but to move to a more restrictive setting of monetary policy,” said Ivan Colhoun, chief economist at CreditorWatch.

The interest-rate-sensitive tech sector led losses on the ASX. Software makers Technology One and Xero shed 1.6 per cent and 0.7 per cent, respectively, data centre operator NextDC lost 2.6 per cent, and family member tracking app Life 360 shed 3.9 per cent. Bucking the trend, the nation’s biggest tech stock – embattled WiseTech Global – edged up 0.2 per cent, having lost 40 per cent this year so far.

Among the stocks dependent on consumer discretionary spending, Wesfarmers, which owns the Kmart, Officeworks and Bunnings chains, slipped 0.1 per cent. Electronics retailer JB Hi-Fi fell 1.9 per cent, furniture seller Harvey Norman dropped 2.2 per cent, fashion jewellery chain Lovisa lost 1.7 per cent and Super Retail Group slumped 4.6 per cent.

The financial sector, which makes up more than a third of the ASX, was mixed after the RBA decision. CBA and Westpac were both down 0.6 per cent, while National Australia Bank and ANZ rebounded and closed with gains of 1 per cent and 0.3 per cent, respectively.

Energy stocks were among the session’s biggest losers. Oil prices steadied after posting the biggest drop in almost three weeks as traders look to reports this week to assess the extent of the glut. Brent crude traded above $US62 a barrel after tumbling 2 per cent overnight. Oil and gas giant Woodside finished down 1.2 per cent and Santos dropped 1.4 per cent.

Gold producers led the mining sector lower, with Northern Star down 1.2 per cent, Evolution Mining down 1 per cent and Newmont down 0.8 per cent. Profit taking saw rare earths miner Lynas slump 5 per cent. The iron ore giants were mixed. Fortescue Metals rose 1.7 per cent, while Rio Tinto slipped 0.1 per cent. BHP dropped 0.4 per cent amid news it will sell part of its 85 per cent stake in a power network that supplies its vast iron ore operations in the Pilbara region in WA to BlackRock’s Global Infrastructure Partners business for $US2 billion.

TPG Telecom sent communication services stocks lower. It was down 1.6 per cent after the telco revealed a possible second fatal Triple Zero failure linked to a Samsung handset, telling a Senate inquiry it only learnt this week that a September emergency call problem may have involved a death, on top of last month’s fatal incident in Sydney. Telstra shares fell 0.6 per cent.

Car parts retailer Bapcor tanked 21.3 per cent after the company warned weak demand in October and November from its trade customers would lead to a first-half net loss of up to $8 million.

The rate outlook in Australia stands in stark contrast to the US, where an interest-rate cut is all but certain this week, even though traders are growing anxious about the pace of next year’s cuts.

On Wall Street overnight, the S&P 500 slid 0.3 per cent after the equities benchmark closed within spitting distance of an all-time high. The Nasdaq 100 fell 0.2 per cent and the Dow Jones Industrial Average lost 0.4 per cent.

Busy merger news failed to bolster the mood after President Donald Trump raised potential antitrust concerns on Netflix’s planned takeover of the Hollywood studios and streaming business of Warner Bros. Discovery, and Ten Network’s owner, Paramount, stepped in with its own hostile bid.

Uncertainty over the pace of rate easing in 2026 and wariness about the sustainability of an AI-driven rally tempered sentiment. US stocks had rebounded in recent weeks after some Fed officials signalled they intend to cut rates for a third time straight on Wednesday.

“The tone of Chair Powell’s press conference and accompanying statement will be critical,” wrote Deutsche Bank strategist Jim Reid. “We expect Powell to emphasise that the hurdle for further cuts in early 2026 is high, signalling a near-term pause. This guidance will be key to maintaining credibility.”

Among the market movers, Warren Buffett’s investment firm Berkshire Hathaway was a heavyweight and fell 1.4 per cent after announcing a shake-up of some of its top leadership. Todd Combs, who had been CEO of the company’s GEICO insurance business, is leaving for a job at JPMorgan Chase, while chief financial officer Marc Hamburg will retire next year.

Netflix dropped 3.4 per cent after Paramount announced a $US108 billion ($163 billion) bid in hopes of trumping Netflix’s deal to buy Warner Bros., which was announced last week.

Paramount said it’s offering $US30 for each Warner Bros. Discovery share, as well as a quicker and easier way for investors to get their payout. Paramount is offering to buy all of Warner Bros. Discovery in cash, unlike Netflix’s offer of cash and stock for just Warner Bros. following its pending split with Discovery.

The board of directors for Warner Bros. Discovery had agreed to Netflix’s offer last week, but it’s already facing potential scrutiny from federal regulators because of worries about too much industry power sitting at one company. President Donald Trump said on Sunday that a Netflix-Warner Bros. combination “could be a problem.”

Warner Bros. Discovery rose 4.4 per cent following the hostile buyout bid, and Paramount Skydance’s stock soared 9 per cent.

Elsewhere on Wall Street, Confluent soared 29 per cent after IBM said it would buy the company, which helps customers connect and process data. IBM said the $US11 billion deal will help customers deploy artificial-intelligence tools better and faster, and its shares added 0.4 per cent.

Moves elsewhere on Wall Street were relatively modest. The US stock market has become much more calm recently following weeks of sharp and scary swings.

The highlight of this week will come Wednesday with the Fed’s rate decision. Stocks have run to the edge of their records on expectations that the US central bank will cut its main interest rate for the third time this year.

The big question is what kind of hints the Fed will offer about where interest rates will go after that. Many on Wall Street are bracing for talk aimed at tamping down expectations for more cuts in 2026.

Inflation has stubbornly remained above the Fed’s 2 per cent target, and Fed officials are notably split in their opinions about whether high inflation or the slowing job market is the bigger threat to the economy.

with AP, Bloomberg

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