Australia: Shares close flat as banks offset miners' drag
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AUSTRALIAN shares shed early gains to close flat on Wednesday (Oct 12) as a slump in commodity stocks offset a jump in financials, with risk appetite also subdued ahead of upcoming US inflation data.
The S&P/ASX 200 index closed 0.04 per cent higher at 6,647.5, after having dropped in each of the three previous sessions.
Financial stocks snapped a four-session losing run to jump 1.9 per cent, with the “Big Four” banks surging between 1.2 and 4 per cent.
US inflation data – producer price data due later in the day and CPI data due Thursday – is expected to keep the US Federal Reserve on its aggressive interest rate hike path.
At face value, rate hikes tend to bode well for banks as it often leads to higher net interest margins and profitability.
“Financials have a chance to benefit if recession worries compel the Fed and other central banks to rethink their extremely stubborn hawkish monetary policy stance,” said Kunal Sawhney, chief executive of Kalkine Group.
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Major central banks globally have been raising rates to curb inflation and are expected to continue to do so into next year, igniting fears the moves could lead to a recession.
Reserve Bank of Australia assistant governor Luci Ellis emphasised the country’s neutral rate, which is at least 2.5 per cent, was a moving target and hard to determine at any stage of time, further limiting its usefulness for monetary policy.
Among commodity stocks, miners lost 1 per cent, with BHP, Rio Tinto and Fortescue Metals shedding between 0.8 and 3 per cent.
However, Lake Resources jumped 2 per cent after signing a lithium supply deal for a project in Argentina.
Energy stocks retreated 1.5 per cent as oil prices remained pressured by demand woes in China due to tightening Covid-19 curbs. Woodside Energy and Santos fell 1.9 per cent and 2.5 per cent, respectively.
Queensland Pacific Metals soared 16.7 per cent after General Motors said it will invest up to US$69 million for a stake in the company.
New Zealand’s benchmark S&P/NZX 50 index lost 0.8 per cent to 10873.2. REUTERS
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