Australian shares edge higher ahead of RBA decision, but set to snap five-month rally

Australian shares were set for their first monthly decline in six, even as the market rose slightly on Tuesday as investors kept to the sidelines ahead of a widely expected hold on interest rates by the central bank.

The S&P/ASX 200 index rose 0.2% to 8,880.40 by 0035 GMT.

The benchmark has declined 1% so far in the month, in line with its average fall in September of 0.95%.

With the Reserve Bank of Australia (RBA) widely expected to hold interest rates steady at 3.6% later in the day, investors will look for any forward guidance after a hot inflation report led markets to call time on the current easing cycle.

RBA Governor Michele Bullock has consistently indicated trimmed mean inflation is the key metric; this measure eased to a three-year low of 2.7% in the second quarter, further within the central bank’s 2%-3% target range.

Swaps are pricing in a near 50-50 chance of a November rate cut, with expectations for the policy floor nudging up to 3.25% from 3.12% just weeks ago.

The RBA has lowered interest rates thrice so far this year, in February, May and August, totalling 75 basis points.

Mining stocks advanced 1.4% on Tuesday and were set for a third straight month of gains.

BHP and Rio Tinto advanced 2.3% and 2.1%, respectively, while Fortescue climbed 0.8%.

Gold stocks rose 0.5% after bullion prices hit a record high overnight. The sub-index was on track for its best month since February 2016.

Gold miners Northern Star Resources and Evolution Mining rose 2.4% and 2.1%, respectively.

Energy stocks lost 1.5% as oil prices slumped. Oil and gas firm Woodside Energy dropped 1.9%, while Santos shed 1.2%.

Banks lost 0.4%, with the “big four” banks down between 0.3% and 0.9%.

In New Zealand, the benchmark S&P/NZX 50 index edged 0.1% higher to 13,142.96.