The Australian share market has pulled back as the Reserve Bank offered no new stimulus for the improving Australian economy, despite chaos in the bond markets that has pushed up interest rates.

By 2:50pm AEDT, the All Ordinaries index had shed one-fifth of a per cent, or 12 points, to 7,031 with more sectors moving into the red.

The index had put on 1 per cent in value in early trade on hopes of another sugar hit from the RBA and after strong gains on Wall Street on optimism about the latest coronavirus vaccine.

The ASX 200 index also lost its gains and was down 5 points, or less than 0.1 per cent, at 6,787.

Education firms, oil stocks, miners, industrials, utilities and real estate firms declined, while consumer companies, banks, technology stocks and healthcare firms maintained the higher ground.

A2 Milk (+7.1pc) was higher, as was media company Nine Entertainment (+6.1pc) and metal recycler Sims Metal Management (+5.4pc).

Going down on the ASX 200 were gold miners Gold Road Resources (-7.2pc), Westgold Resources (-5.8pc) and Northern Star (-3.9pc) as the price of the precious metal weakened.

Litigation funder Omni Bridgeway and engineering construction firm CIMIC were also in the red.

Biotech firm Mesoblast fell 5.3pc to $2.33 after it raised $US110 million by issuing new shares to US investors at a discount.

RBA leaves rates at record lows

In economic news, the Reserve Bank met today and kept the nation's official interest rates near zero, at 0.1 per cent.

That was in line with the predictions of all but one of the 15 economists surveyed by Refinitiv.

In his post-meeting statement, RBA governor Dr Philip Lowe said Australia's economic recovery was "well underway" and stronger than earlier expected.

Dr Lowe noted that rising bond yields globally had lifted the Australian dollar but reiterated that the central bank would not raise official interest rates until inflation has increased above 2 per cent.

"The positive news on vaccines together with the prospect of further significant fiscal stimulus in the United States has seen longer-term bond yields increase considerably over the past month."

"Reflecting these global developments, there have been similar movements in Australian bond markets.

Analysts from investment bank UBS had predicted that the RBA would take more radical step and ramp up its quantitative easing (QE) program — colloquially known as digital "money printing" — and even start buying 20-year government bonds.

"We think the bank may add to their existing $200 billion QE envelope (effectively, stepping up their weekly pace of buybacks from the current $5 billion per week)," UBS strategist Giulia Specchia wrote in a note.

The Australian dollar fell to a daily low of 77.37 US cents immediately after the RBA's announcement, then quickly regained its lost ground to around 77.6 US cents.

Rio Tinto and BHP face setback over copper mine on Apache land

In the US, Rio Tinto and BHP's controversial Resolution Copper project in Arizona is facing another hurdle, with the US Department of Agriculture ordering the US Forest Service to withdraw the final environmental impact statement, which paved the way for a land transfer to the big miners in the dying days of the Trump administration.

The mine development on sacred Apache land is opposed by traditional owners including the San Carlos Apache, who lodged an emergency appeal.

US lawyer Luke Goodrich from Becket Fund, who are representing Apache Stronghold, a grassroots group which is fighting against the mine, said the move was only a temporary reprieve for the Oak Flat site.

"The government knows the destruction of Oak Flat violates federal law, including the Religious Freedom Restoration Act, so it's retreating temporarily," he said.

"But a temporary retreat doesn't solve the problem."

Rio Tinto shares fell (-0.3pc), while BHP slipped (-1.3pc) in late afternoon trade.

Spot gold slipped 0.5 per cent to $US1,714.54 an ounce, while oil was also sold off with Brent crude oil falling 1.2 per cent to $US62.93 ahead of an OPEC meeting later this week.

Home approval permits slump as government stimulus wound back

The Bureau of Statistics said that approvals to build new homes fell sharply in January.

Dwelling approvals dropped 19.4 per cent from December to January, seasonally adjusted.

Queensland led the slump, with permits to build new homes down by one third.

The value of new approvals for dwellings declined by nearly 17 per cent, seasonally adjusted.

EY's chief economist Jo Masters said the figures reflected the scaling back of the Federal Government's HomeBuilder construction subsidy.

"This is perhaps the first sign of the temporary nature of the recent surge in building approvals as the first, higher-paying stage of the Federal Government's HomeBuilder scheme came to an end."

"In the near term, the surge in HomeBuilder applications at the end of 2020, as well as the extension of the program to March, will provide support for house approvals."

"However, at the completion of the scheme we should expect to see a sizable pull back in approvals as weak population growth and high residential vacancy rates in Australia's largest cities weigh on demand for new housing," Ms Masters said.

The latest economic growth figures for the December quarter are out tomorrow.

Chief economist at BIS Oxford Economics Sarah Hunter said ABS balance of payments data showed that net exports could put a 0.1 per cent drag on GDP growth for the December quarter.

The current account surplus rose to $14.5 billion thanks to booming commodity prices and a rebound in farm exports thanks to a break in the drought.

"The surplus would have hit record highs were it not for a strong rebound in goods imports," she said.

"Restocking by retailers following the strength in goods retail turnover through 2020 led to a 10.1 per cent increase in the volume of consumer goods imports."

Capital Economics said it had raised its estimate for the quarter from 2.3 per cent to 2.7 per cent growth "in light of the solid data on public investment and net trade."

Global markets rebound

On Wall Street, the S&P 500 posted its biggest one-day gain since June as bond markets calmed after a month-long selloff.

The benchmark S&P index closed sharply higher (+2.4pc) at 3,902 points.

The industrial-skewed Dow Jones gained 603 points (+2pc) to 31,536, while the tech-heavy Nasdaq Composite surged (+3pc) to 13,589.

"We got a pretty good bounce-back from the selling at the end of last week," Rick Meckler, partner at Cherry Lane Investments in New Jersey, said.

Also boosting the market was a highly-anticipated $US1.9 trillion coronavirus relief bill, which was approved by the US House of Representatives on Saturday, and now moves to the Senate.

It was also a strong day for European markets, with Britain's FTSE, Germany's DAX and France's CAC 40 all closing 1.6 per cent higher.

Major sovereign bonds rallied on Monday as markets showed further signs of stabilisation after their worst monthly performance in years.

Expectations of economic recovery and rising inflation boosted global benchmark bond yields in February to their biggest monthly rises in years.

The yield on America's benchmark bond, the 10-year Treasury note, traded at 1.4376 per cent, down from 1.456 per cent on Monday.

Sebastien Galy, senior macro-strategist at Nordea Asset Management, noted that the US Treasury yield has settled below the one-year highs over 1.60 per cent touched last week, even as the US Federal Reserve and others like the European Central Bank refused to intervene and cap rising yields.

ABC/Reuters