Australian shares hit 2-1/2-month high as lower oil prices fuel broad rally

Australian shares achieved a two-and-a-half-month high on Tuesday, buoyed by falling oil prices and a surge in risk appetite. The S&P/ASX 200 index climbed 1.1% to 9,129, marking its highest level since August 26. Despite this, the index's relative strength index approached 70, signaling a potential overbought condition.

Oil prices declined after US President Donald Trump appeared less interested in military intervention against Iran, reducing inflation worries that had burdened markets this year. Australia has remained relatively insulated from artificial intelligence-related market turbulence due to its limited exposure to the technology sector.

Colin Dransfield, an associate director at Aegis Lane Investments, noted that there is "less volatility on the up and downside of tech" in Australia. He anticipates a return of capital to the country, even if enthusiasm for AI persists elsewhere, with resource stocks expected to benefit the most.

Miners rose 1.5% to a near one-month high, driven by stronger copper prices, with BHP up 1.1% and Rio Tinto gaining 0.4%. Gold stocks saw a 2.3% increase, reaching their highest level in a month and a half. Financials also gained 1.1%, marking their best session in nearly two weeks, after recovering from a 1% decline the previous day. Commonwealth Bank of Australia led the financial sector with a 1.8% increase ahead of its first-quarter results.

Australia's 10-year bond yield decreased by 2.3 basis points to 4.99%, bolstering rate-sensitive property stocks, which jumped 2.2%. Among individual stocks, Qantas Airways surged 6.3%, reaching a 12-week high, following its announcement of 850 job cuts. Virgin Australia also rose 1.8%. In contrast, local tech stocks experienced a modest gain of 0.3%.

The Australian government announced plans to require AI firms to report any breaches, adding to the regulatory scrutiny that has troubled AI-linked stocks globally. Although local tech stocks were up 0.3%, investors now anticipate US consumer price data later in the day to gauge the Federal Reserve's policy outlook. Meanwhile, New Zealand's S&P/NZX 50 index surged 1.4% to a record 14,167.41.