Australian shares climbed over 1 per cent on Monday (Oct 31), posting their best monthly gain since March, ahead of a likely modest interest rate hike by the central bank on Tuesday.

The S&P/ASX 200 index ended 1.2 per cent higher at 6,863.5. The benchmark gained 6 per cent in October, its best month since March.

“Investors probably have formed an opinion that high inflation and rising interest rates are not impacting economic and corporate growth to the extent it was expected earlier,” said Kunal Sawhney, chief executive at Kalkine Group.

Data showed that Australian retail sales rose 0.6 per cent in September from August with spending staying surprisingly resilient in the wake of surging inflation and higher interest rates.

However, analysts at Citi noted that higher interest rates and high price growth in food, rents, household energy and automotive fuel costs are starting to alter household spending patterns. “We continue to expect ongoing interest rate rises to dampen discretionary spending growth in the future,” they said in a note.

The resilient spending is one reason the Reserve Bank of Australia (RBA) is considered certain to raise interest rates for a seventh consecutive month at its policy meeting on Tuesday, with a Reuters poll seeing a modest 25 basis point hike.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Financial stocks climbed as much as 1.3 per cent to their highest level since Jun 6 and led gains on the benchmark. The so-called “Big Four” banks advanced between 0.6 and 1.3 per cent.

Technology stocks tracked Friday’s sharp rise in Wall Street indices to gain 2.6 per cent.

Heavyweight mining stocks fell 0.04 per cent on weak iron ore prices.

Gold and energy stocks fell 1.7 per cent and 0.4 per cent respectively as bullion headed for its seventh monthly loss and oil prices slipped.

New Zealand’s benchmark S&P/NZX 50 index rose 1.9 per cent to finish the session at 11,338.43. The benchmark posted its best day since Feb 2. REUTERS