Australia shares down as miners fall; NZ up slightly

[BENGALURU] Australian shares fell for the second day on Tuesday as expectations of higher US inflation and faster-than-expected Federal Reserve rate increases under Donald Trump's presidency hurt equities.

Traders said that with local bond yields rising in tandem with those in the United States, defensive stocks came under pressure.

The S&P/ASX 200 index was down 0.5 per cent, or 28.03 points, at 5317.8 at 0100 GMT. The benchmark fell 0.5 per cent in the previous session.

The healthcare sector was the worst performer on the index, with its biggest stocks CSL Ltd and Ramsay Health Care losing 1.1 per cent and 2.1 per cent, respectively.

Utilities, considered defensive stocks alongside healthcare and consumer staples, also lost heavily. Electricity generator and retailer AGL Energy slumped as much as 1.5 per cent before recovering a bit to be 0.4 per cent lower.

"You can put it down to the change at the moment in the bond market," said Evan Lucas, a market strategist at IG markets, referring to rising local bond yields.

"Therefore, those seen as bond-like securities are under most amount of pressure."

A strong US dollar, driven by the surge in Treasury yields, has also knocked commodities priced in US dollars.

The US dollar hit an 11-month peak against a basket of currencies and has remained well bid since Mr Trump's shock win in the US Presidential election last week. Markets expect Mr Trump's policies will usher in higher US spending, growth and inflation, sending Treasury bond yields skyrocketing.

With the commodities and resources under pressure from a stronger US dollar, Australia's big miners BHP Billiton, Rio Tinto, and Fortescue Metals sold off, falling between 0.8 per cent and one per cent.

The energy index bounced from the previous session's losses, eking out minor gains, as oil prices rebounded from three-month lows on rekindled hopes for an Opec production cut.

The financial index remained under pressure on subdued outlook for the 'Big Four' banks, which continued to underperform. Westpac Banking Corp and Australia and New Zealand Banking Group, which traded ex-dividend on Monday, lost about one per cent each.

New Zealand's main index was was 0.2 per cent, or 14.4 points, higher at 6,752.19, after gaining 0.6 per cent in the previous session.

A devastating earthquake that struck the South Island on midnight on Sunday and killed at least two people was expected to cost the nation's treasury a few billions of dollars.

Post-quake rebuilding is expected to prove stimulatory, although markets were mainly driven by recent rate cuts and data showing a solid economy.

Losses in financials were offset by gains in utilities and healthcare stocks.

While Westpac Banking Corp and Australia and New Zealand Banking Group lost 1.2 per cent and 1.7 per cent respectively, retirement villages operator Summerset Group and electricity producer Contact Energy were among the biggest gainers on the main index.

REUTERS