The Australian sharemarket opened lower on Tuesday despite a strong rally on Wall Street overnight as investors await the Reserve Bank of Australia's (RBA) latest interest rate decision today.
By 10:30 am AEST (12:30 am GMT), the ASX 200 Index was trading 0.7% lower.
The move partially erased gains achieved on Monday as the equities benchmark was buoyed by news of peace agreement between the United States and Iran, which had been expected to be formally signed in Switzerland on Friday.
Stocks in New York delivered their third consecutive day of price rises on Monday (Tuesday AEST), triggered by the preliminary agreement, which is aimed at ending hostilities in the Middle East and reopening the Strait of Hormuz.
The Dow Jones Industrial Average rose 0.9% to finish at a record high, while the S&P 500 added 1.7% and the Nasdaq Composite surged 3.1%.
U.S. crude oil futures dropped almost 5% after the peace announcement, boosting the prices of energy-sensitive airline and cruise line stocks and interest rate-sensitive technology stocks.
"Markets are higher on a classic relief rally. We have a U.S.-Iran deal that's driving oil sharply lower. This is easing inflation fears and basically pushing investors back into risk assets like technology," Cetera Investment Management chief investment officer Gene Goldman was quoted by Reuters in this article.
The Australian market had rallied strongly on Monday with the ASX 200 rising 110 points, or 1.3%, to 8,914.0, its highest level in two months, in response to the peace developments.
A strong focus of investor attention today will be the RBA’s interest rate decision at 2:30 pm AEST (4:30 am GMT), with the market expecting no change to the official cash rate of 4.35%.
Stocks likely to attract attention on Tuesday include the major energy producers following the latest slide in crude prices, while technology names could benefit from the strong performance of the Nasdaq and semiconductor sector overnight.
In fixed interest markets, the Australian Government bond yield curve steepened as two-year rates fell 0.94% to 4.515% and 10-year yields added 0.34% to 4.859 at the time of writing.
