The Australian sharemarket erased early losses to edge up for a second consecutive session on Tuesday, following offshore futures which turned higher ahead of a pivotal quarterly inflation report on Wednesday.

Investor caution prevailed ahead of the report, which could influence the Reserve Bank of Australia’s next move on interest rates. Early broad-based sector declines gave way to gains in most areas, with only a few sectors still trading lower by the close.

The S&P/ASX 200 index added 6.9 points, or 0.1 per cent, to 8740.60 after dipping 0.6 per cent to a two-week low of 8643.50.

Financials were mixed ahead of the consumer price index (CPI) release for the June quarter, which may determine whether the RBA cuts interest rates next month.

Governor Michele Bullock said the RBA wanted more evidence of slowing inflation before pulling the trigger on another rate cut. Money markets are pricing in a 93 per cent chance of a move lower.

UBS executive director equities Rob Taubman said the inflation data on its own was unlikely to move the dial significantly for equity markets, with views on a rate cut remaining very neutral.

“Markets aren’t going to treat it as a done deal because of a single number. It’s not one number that would change everything,” he said.

“People are looking at unemployment levels, aggregate housing prices, and what’s happening in those markets, so there’s still a much broader lens on the environment than just the one number — the CPI and where it’s at.”

Commonwealth Bank extended Monday’s decline, falling 0.4 per cent to $174.29. The lender flagged 45 roles as redundant following the rollout of a new chatbot system for customer inquiries. Westpac fell 0.1 per cent to $33.19, ANZ was flat at $30.32, and National Australia Bank jumped 1.2 per cent to $38.20.

The rate-sensitive real estate sector was weaker, with Vicinity Centres and Mirvac Group down 1.6 per cent and 1.4 per cent respectively.

Mr Taubman said there was a notable rotation underway in the Australian market, with investors shifting funds out of the big banks and into healthcare stocks such as CSL and ResMed ahead of their results.

“There’s a bit of a rotation back into healthcare,” he said. “We’re still seeing a bit of money come out of financial banks back into healthcare, and that’s a change in the pattern versus the last year or so where the banks have been strongly outperforming.“

Shares in CSL rose 0.5 per cent to $272, while ResMed fell 0.2 per cent.

Elsewhere, miners were lower as gold and other commodity prices slipped overnight. Major iron ore miners trimmed earlier losses as iron ore futures rebounded slightly after a 2.6 per cent drop on Monday. Fortescue Metals fell 0.3 per cent, while BHP lifted 0.3 per cent to $40.42 and Rio Tinto was flat at $116.93.

Energy stocks outperformed as the strongest sector, buoyed by a rebound in crude oil prices amid geopolitical risks and tightening supply signals. Woodside Energy gained 1.6 per cent to $26.60 after agreeing to assume operatorship of the Bass Strait gas assets from ExxonMobil Australia.

Stocks in focus
In corporate news, Viva Energy plunged 6.4 per cent to $2.05 after its first-half guidance disappointed markets, with group EBITDA coming in 6 per cent below consensus. The company blamed a 27 per cent collapse in tobacco sales, impacted by new packaging laws and ongoing illicit trade.

Boss Energy dived 5.5 per cent to $1.80 following broker downgrades. The stock lost more than 40 per cent on Monday after warning it was unlikely to meet production targets at its Honeymoon project in South Australia and raised concerns about uranium quality.

Michael Hill reversed earlier losses to end up 2.5 per cent after the company announced the death of its founder, Sir Michael Hill, earlier in the day.

Sandfire Resources rose 1.6 per cent to $11.16 following a strong June quarter result, with RBC Capital Markets analyst Kaan Peker highlighting robust production, better cash flow, and solid guidance as key drivers behind the positive market response.