In a surprising turnaround, the S&P/ASX 200 finished Thursday's session at 8,732.4, up 35.9 points or 0.41%, completely reversing an earlier futures signal that had pointed to a 0.8% decline. The 68-point futures loss never materialized in the cash market, representing a notable 1.2-percentage-point swing from the pre-open indication.
The recovery was broad-based, but the standout performers were the big four banks. National Australia Bank closed at A$39.22, up 3.2%, while ANZ gained 2.1% to A$37.78. Commonwealth Bank added 1.6% to A$154.01, and Westpac rose 1.2% to A$34.83. These moves were calculated by TS2 based on the quoted closing prices.
The day's outcome was not merely an extension of Wednesday's gain but a clear reversal of the morning's bearish setup. Local futures had dropped following the Federal Reserve's decision to raise its target range by 25 basis points to 3.75%–4.00%, its first increase in three years. Wall Street's S&P 500 lost 0.5% and the Dow fell 1.2%, reflecting the initial negative reaction to the Fed's move.
Despite the Fed's hawkish tone, Australian equities found support, joining a mixed Asian session on the positive side. The Associated Press confirmed the ASX close at 8,732.4, underscoring the resilience of the local market.
The rally in banks was particularly notable given the Fed's rate hike, which typically pressures rate-sensitive sectors. However, Australian banks appeared to be bargain hunting after recent weakness, rather than simply mirroring the U.S. close. The advance was not a blanket risk-on move; while financials gained 1.42%, the All Ordinaries Gold index fell 1.98%, highlighting a sector-specific rotation.
This divergence suggests the index gain was heavily dependent on the bank rebound and does not necessarily signal broad investor enthusiasm for commodities or higher-rate assets. The domestic rate outlook remains a key factor. The Reserve Bank of Australia's cash-rate target stands at 4.35%, with the next decision scheduled for 2:30 p.m. AEST on September 29. In August, the RBA stated that inflation was still too high and left the door open for another increase if upside risks materialize.
A one-day bank rally does not guarantee that another RBA hike would boost bank earnings. While higher lending rates can support asset yields, the actual impact depends on deposit repricing, wholesale funding costs, loan growth, and credit losses. Investors will need to focus on net interest margins and arrears data in the next reporting cycle for a clearer picture.
The strongest counterargument is that Thursday's close may be a short-lived positioning reversal. Futures were wrong about the direction, but the Fed has tightened global financial conditions, and Australia faces its own policy decision in less than two weeks. A durable turn would require broader participation beyond banks and another session holding above 8,700. A renewed rise in bond yields or a hawkish RBA signal could test both the index and the banking sector's resilience.
