The Australian sharemarket experienced a volatile session on Tuesday, closing lower amid mixed signals regarding a Middle East peace deal and a larger-than-anticipated increase in the minimum wage. The benchmark ASX 200 slipped 20.60 points, or 0.24%, to 8708.80, while the broader All Ordinaries index remained virtually flat, edging down just 3.80 points, or 0.04%, to 8966. Despite the overall decline, the market staged a remarkable recovery of approximately 100 points in the afternoon session, providing some relief to investors.
Technology stocks surge while healthcare and banks drag
On a broadly weak trading day, seven of the 11 sectors ended in the red. Technology stocks were a standout performer, rallying 4.71% as a sector. Accounting software provider Xero climbed 7.47% to $87, WiseTech Global jumped 7.8% to $42.23, and Life360 soared 13.25% to $23.07. In contrast, healthcare shares weighed heavily on the market, with CSL dropping 1.74% to $92.56, Sigma Healthcare falling 1.71% to $2.87, and ResMed declining 2.07% to $26.02. Banking and consumer staples also contributed to the downward pressure.
Middle East uncertainty and wage hike fuel volatility
Investors remained cautious as geopolitical tensions in the Middle East escalated. While US President Donald Trump stated that talks were "progressing" and that Israel and Hezbollah would halt attacks on each other, Iran threatened to suspend diplomatic ties and close the strategic Strait of Hormuz. IG market analyst Tony Sycamore described Tuesday's recovery as "remarkable," noting that the triple-digit range marked the third such swing in the past four sessions and the ninth in the past month. "This is a clear sign of a market grappling for direction, primarily within a stubborn 8500 to 8700 range," Mr Sycamore said. He added that the intraday turnaround was supported in part by President Trump, who expressed confidence on Truth Social that an agreement to extend the ceasefire and reopen the Strait of Hormuz could be reached "over the next week."
Adding to the market's woes, the Fair Work Commission announced a 4.75% pay increase for the nation's lowest-paid workers, exceeding headline inflation of 4.2% and current wage growth of 3.3%. This decision stoked fears of increased costs for businesses and added pressure on the Reserve Bank to raise interest rates. Retail shares suffered, with Woolworths slumping 1.85% to $34.41, Coles dropping 0.74% to $21.55, and Endeavour Group falling 1.73% to $2.84.
Rate hike expectations rise
AMP economist My Bui warned that the wage hike could lift inflation due to the large number of Australians affected. "As a result, we are now forecasting another rate hike in November, taking the peak cash rate to 4.85% for this cycle. There is also a risk that the upcoming hike comes sooner, in June rather than August," she said. Prior to Tuesday's announcement, AMP had predicted one more interest rate hike by August 2026.
Company news: SRG Global, DroneShield, Pro Medicus
In corporate developments, SRG Global surged 16.56% to $3.66 after announcing $1.85 billion worth of contracts secured across water, defence, energy, industrial, resources, ports, data centres, health, and education. Defence contractor DroneShield traded 3.55% higher to $3.21 following a new $24.9 million contract linked to the US Department of War's Joint Interagency Task Force 401. Pro Medicus shares continued their upward trajectory, surging 10.81% to $160.08 after announcing on Monday a five-year contract with its US subsidiary Visage Imaging.
The Australian dollar edged up 0.15% to buy 71.75 US cents.
