Australia: Shares end lower after RBA hike
AUSTRALIAN shares reversed course to close lower on Tuesday (Sep 6) after the country’s central bank raised its cash rate by 50 basis points (bps) and signalled more tightening ahead to contain inflation.
The S&P/ASX 200 index ended 0.4 per cent lower at 6,826.3 after rising as much as 0.5 per cent earlier in the session. The benchmark rose 0.3 per cent on Monday.
In its fifth hike since May, the Reserve Bank of Australia (RBA) raised its cash rate to a 7-year high of 2.35 per cent.
“The statement made it pretty clear that there are more hikes to come, which is not what equity bulls wanted to hear,” said Matt Simpson, a senior market analyst at City Index.
“We expect another 50 bps hike in October... RBA tends to operate with a bit of a lag and we could expect a pause in November after they have a chance to see more inflation data coming through,” said Kerry Craig, global market strategist at JPMorgan.
The RBA aims to keep inflation in a band of 2 per cent to 3 per cent over time, and currently does not see it coming back to 3 per cent until late 2024.
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“When the reopening impulse start to come off - savings rate will come down and the drag from the housing market will create disinflationary pressures next year. We could expect inflation rate to fall backwards, but quite slowly,” Craig added.
On the domestic bourse, heavyweight mining and financial stocks fell 0.2 per cent and 0.4 per cent, respectively, to lead losses on the benchmark.
The so-called “Big Four” banks fell between 0.3 per cent and 0.6 per cent.
Mining giants BHP Group and Rio Tinto fell 1.7 per cent and 1.1 per cent, respectively.
Gold stocks fell 0.6 per cent despite strength in bullion prices.
Energy stocks rose 0.5 per cent while technology stocks firmed 0.7 per cent.
Meanwhile, data due on Wednesday is expected to show the country’s gross domestic product rose around 1 per cent in the second quarter, lifting annual growth to 3.5 per cent from 3.3 per cent.
New Zealand’s benchmark S&P/NZX 50 index ended 0.2 per cent lower at 11,599.23. REUTERS
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