Australia: Shares finish lower on RBA outlook

[SYDNEY] Australian shares reversed course to end lower on Tuesday, with financials and healthcare stocks leading the decline after the central bank's cautious commentary on the country's near-term economic fortunes.

The S&P/ASX 200 index settled 0.65 per cent down at 5,252.30, having fallen as much as 1.9 per cent after early gains of 2.6 per cent.

While the Reserve Bank of Australia left its cash rate at a record low of 0.25 per cent on Tuesday, as expected, it warned that a very large economic contraction is likely in the June quarter. The central bank also said the unemployment rate is expected to reach its highest level for many years.

"The RBA is eyeing a sharp contraction in economic activity and a grim outlook for unemployment. This well and truly snuffed the rally that kicked off the day on the back of positive domestic news on Covid-19 and a big rally offshore," said James McGlew, executive director of corporate stockbroking at Argonaut.

Meanwhile, data from Australia and New Zealand Banking Group showed a 10.3 per cent drop in total job ads in March, erasing the previous month's 1.2 per cent gain, as strict social distancing rules and business closures curbed demand for labour. It was the steepest decline since January 2009, when the global financial crisis was raging.

New Zealand's benchmark S&P/NZX 50 index rose 0.5 per cent to finish the session at 9,809.85.

The Reserve Bank of New Zealand (RBNZ) on Tuesday said it would buy up to US$1.79 billion of local government debt to ease liquidity strains in the funding market as part of steps to cushion the economy from the coronavirus pandemic.

REUTERS