Australian shares have given up early gains by noon on speculation of a sharp rise in new coronavirus cases in the country’s second-most populous state.

The S&P/ASX200 benchmark index was higher by just 0.4 points, or 0.01 per cent, at 6015.0 points by 1200 AEST on Tuesday. The index had climbed nearly 1.0 per cent in early trade.

The All Ordinaries index was 5.4 points, or 0.09 per cent higher, at 6131.3.

IG Markets analyst Kyle Rodda believed traders were speculating that a higher number of new coronavirus cases in Victoria was set to be announced today.

“I think the market may have caught whispers of virus cases in Victoria climbing,” he said.

The state recorded its highest daily increase in cases, 127, and two deaths on Monday.

That could mean more restrictions on Victorians’ movement and trade and would hurt hopes of economic recovery in Australia.

CommSec market analyst Steven Daghlian said no single factor was responsible for the slump.

“We’re going to see markets remain volatile and I wouldn’t be surprised to see a pull back,” he said.

Meanwhile on the ASX, materials were the best performing sector, up by 1.45 per cent. Energy shares gave up gains since early trade and were down 1.46 per cent. Major sector shares, including Santos, Woodside and Origin all dropped by more than 1.0 per cent. This was despite the Queensland Government giving petroleum leases to the Mahalo gas project, which Origin and Santos have interests in. Among major banks, ANZ, the Commonwealth Bank, NAB and Westpac had all dropped into negative territory. In mining, Fortescue had a strong gain of 5.82 per cent to $14.73. BHP was higher by 1.25 per cent to $36.09, and Rio rose 1.11 per cent to $96.50. TPG Telecom, which listed last week following the merger of TPG and Vodafone, was higher by 4.24 per cent to $8.60. Australian Ethical Investment rose by 7.09 per cent to $6.80 after it raised full-year earnings guidance by 41 per cent to between $9 million and $9.5 million. Shares in e-commerce provider Afterpay are in a trading halt while it raised $800 million in a share sale to invest in growing sales and expanding into new markets. The capital raising by the buy now, pay later service will comprise of an institutional placement worth $650 million and another $150 million through a share purchase plan for retail shareholders. Its shares closed on Monday at $68. The main event of interest locally will be the Reserve Bank board meeting later on Tuesday. The central bank isn’t expected to make changes to the cash rate but economists will be watching closely to see what the central bank says about the economy, jobs and the Aussie dollar. There was an early positive lead for Aussie investors after US non-manufacturing activity showed a jump in June to almost return to its pre-COVID-19 pandemic levels. Overseas investors also bet on an improving Chinese economy as the yuan led commodity currencies higher against the US dollar. All three major US indices ended between 1.6 and 2.2 per cent higher. The Australian dollar was buying 69.71 US cents at 1200 AEST, lower from 69.72 US cents at the close of trade on Monday.