Financials drag Australia's shares down; US inflation data is in focus
Australian shares finished marginally lower on Tuesday, as losses among financial stocks outweighed gains by miners. Investors were cautious in advance of an important U.S. inflation report that could affect the Federal Reserve's next interest rate decision.
The S&P/ASX 200 ended 0.4% lower, at 7978.7.
The markets are weighing up whether the Fed will opt for a 25 basis point rate cut or a 50 basis point reduction during its policy meeting on September 17-18.
Mathan Somasundaram is the CEO of DeepData Analytics. He said that Australian markets are closely correlated with the U.S., and are particularly influenced by U.S. inflation figures which influence the Federal Reserve rate decisions.
He said that a weak inflation rate in the U.S. was crucial to maintaining high valuations on the local market. It affects the Fed’s rate cycle, and therefore global sentiment.
In Sydney, the banks lost the most, 1,7%. The "Big Four' banks fell between 1.5% to 1.9%.
The prudential regulator of Australia proposed on Tuesday that bank hybrid bonds be replaced with more stable capital due to the financial stability risks posed by increasing retail investor ownership.
"Banks have overvalued, and ASIC's decision on hybrids is another reason to profit." Somasundaram said that global funds were moving from banks to mines to support the market.
The rally in lithium stocks led to a 2% gain for the miners.
After reports that Chinese EV Battery maker CATL had suspended two mines to reduce lithium supply, Pilbara Minerals & Liontown Resources surged by more than 13%.
REA Group's share price fell by 2.2% after Rightmove, the property company, rejected REA Group's bid for takeover.
Mineral Resources soared by 16% after Foreign Investment Review Board approved the sale of a 49% stake to its Onslow Iron Project haulroad on Tuesday.
Energy, technology and healthcare all lost between 0.3% to 1.4%.
The benchmark S&P/NZX 50 New Zealand index finished largely unchanged. (Reporting and editing by Rashmi aich in Bengaluru, Roushni nair from Bengaluru)
(source: Reuters)
