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Aussie shares end lower as banks fall on inquiry; NZ inches up

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[BENGALURU] Australian shares finished lower on Thursday as an inquiry into the country's scandal-ridden banking sector weighed on financial stocks, while simmering global trade tensions amid worries of fresh US import tariffs on China also dampened sentiment.

Australia's S&P/ASX 200 index slipped 11.2 points to 5,924.1, tracking weaker Wall Street shares that fell for a third session overnight amid concerns about increased protectionism under US President Donald Trump's administration.

Open economies relying heavily on free trade would have much to lose should US protectionism lead to tit-for-tat reprisals globally. Australia in particular is vulnerable as a producer of basic commodities used in the world supply chain.

However, material stocks in Australia firmed on indications that demand from China, the world's top consumer of several commodities, would remain strong.

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Australia's financial index fell up to one per cent, with the 'Big Four' banks down 0.9-1 per cent due to the inquiry.

"The Commission is focusing on their behaviour and some of the headlines appear to be affecting investor sentiment despite the fact that most of these issues are already well-known," said Michael McCarthy, chief market strategist at CMC Markets, referring to the judicial inquiry into the banking sector.

"The spotlight now appears to be affecting trading and they're (banks) certainly underperforming," Mr McCarthy added.

Commonwealth Bank of Australia's chief executive Ian Narev knew that a system of financial incentives to reward mortgage brokers could hurt customers but failed to act, the inquiry into the sector heard earlier in the day.

CBA is the second bank to be scrutinised after National Australia Bank, which conceded on the opening days of the inquiry that its system of bonuses and incentives encouraged bankers to engage in fraudulent lending practices.

Shares of both ended down one per cent, their third session of declines.

Australia's material stocks offered a bright spot, rising as Chinese iron ore and coking coal futures came off multi-month lows after strong economic data from China pointed to firm demand conditions in the world's No 2 economy.

Top miners BHP Billiton and Rio Tinto closed 0.7 per cent and two per cent higher, respectively.

Across the Tasman Sea, New Zealand shares recovered from earlier losses to close up 0.4 per cent at 8,467.33, also helped by strength in utilities and material stocks.

Power generator Meridian Energy, top boost to the index, added 2.6 per cent to hit a near two-month high.

Investors largely shook off data which showed the economy grew at a slower-than-expected pace in the fourth quarter of last year.

REUTERS