Australia: Shares retreat from 11-month high as resource firms fall

[SYDNEY] Australian shares closed lower on Wednesday, dragged lower by losses in the resources sector, while a record-low underlying inflation in the last quarter signalled a possible retention of the accommodative policy stance by the country's central bank.

The S&P/ASX 200 index closed 0.7 per cent lower at 6,780.6, pulling back from a 11-month high scaled on Monday. Markets were closed on Tuesday for a local holiday.

Data showed underlying inflation in Australia stayed at 1.2 per cent in the December quarter, which analysts took as a green light for the Reserve Bank of Australia (RBA) to keep policy super easy.

"Underlying inflation is still far from target and to eventually get it there, the unemployment rate will need to be considerably lower and wage growth much higher," analysts at ANZ wrote, adding that the figure suggested the RBA would continue with a very accommodative policy stance.

"As such, we look for the RBA to extend its quantitative easing programme with an announcement possible as early as next week when the Board meets."

Miners shed 3.4 per cent after Chinese iron ore prices fell.

Fortescue Metals slumped 6.4 per cent to see its worst session in more than four months, while global miners Rio Tinto and BHP recorded significant losses.

New Zealand's benchmark S&P/NZX 50 index closed 0.4 per cent higher to settle at 13,374. A2 Milk was the top gainer in the index.

REUTERS

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