Australia: Shares log best week since mid-March on boost from banks

AUSTRALIAN shares notched their best week since mid-March, even though markets closed flat on Friday (Jul 22) as losses in energy stocks because of an overnight drop in oil prices countered gains in heavyweight banks.

The S&P/ASX 200 index slipped 2.8 points, or 0.04 per cent, to 6,791.5 after 2 straight sessions of gains. The benchmark rose 2.8 per cent for the week.

Energy stocks dipped 1.2 per cent after oil prices fell sharply overnight on higher US petrol stockpiles and as a European Central Bank rate hike stoked demand worries.

Shares of Woodside Energy slipped 0.6 per cent, extending its fall from the previous session even after the company said the cut in its production outlook was due to a change in conversion factors and did not reflect any change in physical product volumes.

Other sector majors Santos and Ampol fell 3 per cent and 1.2 per cent, respectively.

Financials rose 0.6 per cent, with Australia and New Zealand Banking Group climbing 3 per cent, while rival Westpac Banking Corp advanced 1.1 per cent. The financial index gained 4.4 per cent for the week in its best week since mid-March.

“I think it’s just a relief rally in a bear market. We’re starting to see bond yields drop, which is benefiting more growth-oriented companies,” said Cameron McCormack, a portfolio manager at VanEck Australia.

Australia’s 10-year bond yields dropped 10.6 basis points to 3.464 per cent on Friday, the sharpest fall since Jul 6.

“That basically means that banks are earning more money and they can earn more as rates continue to rise and yields continue to push up,” said Jessica Amir, a market strategist at Saxo Capital Markets.

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Australia will report its quarterly inflation data next week, and McCormack expects a high single-digit reading will give the central bank further cause to maintain its hiking cycle.

Shares of Insurance Australia Group closed 1.4 per cent lower after the country’s top general insurer warned of tighter-than-guided margins due to higher claims on account of adverse weather events. Rival QBE Insurance fell 2.1 per cent.

New Zealand’s benchmark S&P/NZX 50 index slipped 6.57 points, or 0.06 per cent, to 11,263.19. REUTERS