Australia shares subdued after Fed tempers easing hopes, New Zealand dips

[BENGALURU] Australian shares were subdued on Wednesday, in line with equities worldwide, after US Federal Reserve officials dampened market expectations of aggressive rate cuts this year.

The S&P/ASX 200 index fell 0.1 per cent to 6,651.90 points by 0217 GMT. The benchmark was 0.1 per cent lower on Tuesday.

Equity markets have rallied this month as investors priced in a rate cut as early as the Fed's July policy-setting meeting. While a 25 basis point cut is being seen as a certainty, many had even dared to expect a half percentage point cut.

St Louis Fed President James Bullard tempered those expectations on Tuesday, saying he did not think the US economy is dire enough to warrant a 50-basis-point cut in July, even though he pushed to lower rates last week.

Separately, Fed Chairman Jerome Powell said the central bank was "insulated from short-term political pressures", thwarting US President Donald Trump's demand for a significant rate cut.

"I suppose with the S&P 500 off about a percent or so, the markets have been running on a prospect of shift in Fed policy. Anything that undermines these expectations is going to have some sort of an impact," said Damien Hennessy, co-founder of Heuristic Investment Systems.

The Australian financial sector, the biggest on the main index by weightage, led the losses on Wednesday.

The country's four biggest lenders were off in a range of 0.3 per cent to 0.6 per cent.

Tuesday's Fed commentary gave the US dollar some respite, as it edged up from three-month lows. That weakened the Australian dollar marginally, but not enough to support stocks of miners, many of which sell their goods in foreign markets for US dollars.

The mining sub-index was flat with BHP Group shares marginally lower, while Rio Tinto added 0.5 per cent.

A resurgent dollar also knocked gold prices off a six-year peak. Aussie gold stocks, which track the precious metal, also declined in response.

Australian gold index heavyweight Newcrest Mining shed 1 per cent, while smaller rivals St Barbara and Northern Star Resources gave up 1.1 per cent and 0.7 per cent respectively.

New Zealand's benchmark S&P/NZX 50 index was marginally lower at 10,409.23 after the Reserve Bank of New Zealand stood pat on benchmark interest rates, maintaining it at a record low of 1.5 per cent.

However, the central bank signalled that lower interest rates may be needed in the future, citing subdued domestic growth and global economic weakness.

Gains in industrials and utilities shares were offset by losses in healthcare and telecom stocks.

Medical devices maker Fisher & Paykel Healthcare was the top decliner on the benchmark index, down 2 per cent.

REUTERS