Australian shares rose sharply on Tuesday as bank stocks bounced back from heavy selling a day earlier and the central bank hinted at a possible cut in the near future after maintaining cash rate steady at a record low of 2.0 percent. The S&P/ASX 200 index opened 1 percent higher and rallied further to close up 1.4 percent, or 73.4 points, at 5,239.2, after the Reserve Bank of Australia said subdued inflation meant there might be room for further easing if needed to support the economy. The benchmark has fallen 3.2 percent so far in 2015.
Meanwile, New Zealand's benchmark NZX 50 index reached a new record high, adding 0.64 percent, or 38.1 points, to finish the session at 6,022.0. Most economists expect the RBA to keep rates on hold at Tuesday's meeting, boosting the local dollar. Bank stocks rallied as investors suspected the sector may have been oversold the previous session, and that a recent decision by major banks to raise their mortgage rates will help offset a slowdown in profit growth.
Of the so-called "Big Four" banks, Commonwealth Bank of Australia, Westpac Banking Corp and Australia and New Zealand Banking Group were 1.5 percent higher, while National Australia Bank added 0.9 percent. Energy stocks also firmed followed a recovery in the oil price overnight.