Aussie Sharemarket Flinches at Rate Hike Fears

The Australian sharemarket experienced a minor gain on Monday as traders made a 'defensive rotation' away from rate-sensitive sectors in response to fresh fears of interest rate hikes. The benchmark index eked out a tiny 0.70 point or 0.01 per cent gain to 8731.90, while the broader All Ordinaries slipped just 3.60 points or 0.04 per cent to 8919.10.

The Reserve Bank of Australia governor Michele Bullock had warned on Friday that the upside risks to inflation had 'materialised', with Westpac and Commonwealth Bank changing their rate forecasts to a hike after her comments. This was up from about an 85 per cent chance this time last week. Money markets are fully pricing in another interest rate hike when Michele Bullock meets on September 28-29.

Global X ETF strategy analyst Joseph Marassa attributed the 'defensive rotation' to higher for longer interest rates and fears of persistent inflation. He noted that the health care sector offset weakness across rate-sensitive sectors, with gains out of healthcare and financials offset by falls in technology shares.