Materials sector continues its fightback

The sharemarket finished lower, rising from the day's trough after the Reserve Bank cut official interest rates to their lowest in more than 50 years.

The benchmark S&P/ASX 200 Index dipped 12.5 points, or 0.2 per cent, to 5143.7, while the broader All Ordinaries lost 11.1 points, or 0.2 per cent, to 5122.7.

The materials sector continued on Monday's good form, adding 2 per cent after strong performances in commodity markets last week. BHP jumped 2.4 per cent to $33.67 while rival Rio Tinto gained 2.1 per cent to $57.39 and Fortescue Metals rose 2.2 per cent to $3.69.

"We might be seeing the start of some type of rotation of money out of the good performers and into the beaten-up cyclical growth companies," said RBS Morgans senior trader Luke McElwaine. "But one swallow doesn't make a summer, as Warren Buffett would say."

The RBA cut the official cash rate by 25 basis points to 2.75 per cent, the lowest level since the central bank began setting rates in 1990 and the lowest since 1959.

Before the announcement, the ASX 200 was down as much as 0.7 per cent.

Despite outperforming most of the market this year, all the big banks finished lower. The outcome was surprising given that in recent months historically low interest rates have led to investors chasing high-yield stocks, such as banks. CBA dropped 1.9 per cent to $70.30, ANZ shed 1 per cent to $31.19, NAB fell 1.6 per cent to $32.95 and Westpac, which is going ex-dividend on Monday, slipped 1.8 per cent to $32.58.

The rate decision also hit the dollar, which fell to a two-month low - from above US102.40¢ to US101.93¢ in late trading.

The drop will come as welcome news for the RBA, which has been concerned about the high dollar and its impact on businesses.

Japan's Nikkei, which was closed on Monday for a public holiday, reacted positively to last week's US jobs figures, which showed signs of improvement in the American economy, Japan's largest export market. The index surged 3.6 per cent, breaking through the 14,000-mark for the first time since mid-2008.

Shares in Coca-Cola Amatil lost 10.5 per cent to $12.93 after the company said it expected a 8-9 per cent fall in first-half earnings. Linc Energy plummeted 17.8 per cent after bad weather caused the delay of an oil well project in Alaska.