Index Update: The S&P/ASX 200 closed lower on Tuesday, shedding 81.10 points, or 0.91%, to 8,813.70, marking a new 20-day low and the weakest close in nearly six weeks. The index has fallen 2.21% over the past five sessions and remains 3.31% below its 52-week high. The broader market decline followed comments from Reserve Bank of Australia Governor Michele Bullock, who cautioned that inflationary pressures could be stronger than anticipated, sparking concerns of potential further tightening. As expected, the RBA kept the cash rate unchanged at 3.6%.

Ten of the eleven sectors finished in the red, led by declines across energy, financials, and consumer stocks. Health Care was the day’s best-performing sector, ending little changed but still down 1.99% over the past week.

Macro Update: The Reserve Bank of Australia kept the official cash rate unchanged at 3.6% on Tuesday, cautioning that house prices and rents are set to climb in 2026 following a surprise rebound in inflation. The decision, widely expected by economists and major banks, leaves rates unchanged since August after three cuts earlier in 2025 aimed at easing pressure on mortgage holders.

Core inflation accelerated to 3% in September, the top of the RBA’s target range — marking its first rise since 2022. Updated forecasts from the central bank now project headline inflation to reach 3.7% by mid-2026, with core inflation expected at 3.2%, reflecting persistent price pressures despite earlier monetary easing.

Meanwhile, the U.S. dollar climbed to a three-month high against the euro on Monday, extending last week’s gains as investors questioned the likelihood of another Federal Reserve rate cut this year.

Top Market Movers: Among the top gainers on Tuesday, DroneShield Ltd (ASX:DRO) advanced 8.62% to close at AUD 4.16, followed by NextDC Ltd (ASX:NXT), which rose 4.24% to AUD 16.49. Domino’s Pizza Enterprises Ltd (ASX:DMP) also climbed 4.19% to AUD 19.13. On the downside, Boss Energy Ltd (ASX:BOE) slipped 5.91% to AUD 1.91, Eagers Automotive Ltd (ASX:APE) fell 5.43% to AUD 32.55, and Brambles Ltd (ASX:BXB) declined 5.26% to AUD 23.41.

Commodity Update: The dollar held firm near a three-month high on Tuesday as a divided Federal Reserve prompted traders to scale back rate cut expectations. Investors also awaited the Reserve Bank of Australia’s policy decision, with rates expected to remain unchanged. Gold slipped 0.54% to USD 3,992.20 per ounce, silver fell 0.80% to USD 47.66, and copper declined 0.61% to USD 10,778.00. Brent crude eased 0.10% to USD 64.80 amid OPEC+ output concerns.

Our Stance: The Australian sharemarket’s decline reflects mounting investor caution as the Reserve Bank signalled inflation could persist longer than expected, even with rates on hold at 3.6%. The warning of rising housing costs in 2026 has added uncertainty to the near-term growth outlook, pressuring rate-sensitive sectors like financials and consumer stocks. With global markets also reacting to the U.S. dollar’s strength and shifting Fed expectations, sentiment remains fragile. While select tech and defense names such as DroneShield and NextDC offered brief optimism, overall market momentum appears constrained until clearer signals emerge on inflation moderation and central bank policy direction.

The S&P/ASX 200 Index faced a challenging session, closing lower with a bearish candlestick formation accompanied by rising trading volume. This combination reflects short-term selling pressure and signals a cautious tone among market participants. On the daily chart, the index is trading below its 21-period Simple Moving Average (SMA), which has now turned into a key resistance level. This suggests that any immediate recovery attempts could encounter overhead supply near this zone. Critical support is observed at 8,740, and maintaining levels above this area will be essential to prevent a deeper retracement and to preserve recent gains. From a broader perspective, the weekly timeframe remains constructive. The index continues to trade above its 21-period SMA, underscoring resilience and supporting the potential for sustained bullish momentum over the medium to long term. Overall, while near-term volatility may persist, the underlying trend structure remains positive.