Australia: Shares up slightly, NZ extends rally on Fed relief

[SYDNEY] Australian shares edged away from near one-month lows on stronger commodity prices, but Wednesday's session was characterised by caution over the financial sector's exposure to a slowdown in the mining industry.

That circumspection checked enthusiasm seen in global riskier assets after Federal Reserve chief Janet Yellen signaled a slower pace of rate increases this year.

The S&P/ASX 200 index rose 0.4 per cent, or 20.84 points, to 5025.4 by 0212 GMT. The benchmark fell 1.6 per cent on Tuesday when the index hit 4,998.5, the lowest since March 2.

The market rose as much as 1 per cent when trading began, but underlying concerns about the exposure of country's largest financial stocks to a slowing mining sector eroded much of the gains.

"Even though the weaker US dollar has helped material stocks in particular, it hasn't helped the banks with concerns continuing about their exposure to the materials sector," said Angus Nicholson, market analyst, IG Markets.

The US dollar fell after Yellen set a cautious outlook for policy tightening, leaving markets wondering if there will be even one hike in US interest rates this year.

Financials, which pared much of the morning gains, still managed the feat of being the strongest performing sector with a gain of 0.18 per cent, probably reflecting the sharp selloff in recent sessions.

Shares in Commonwealth Bank of Australia, Westpac Banking Corp and National Australia Bank each rose more than 0.5 per cent.

In contrast, Australia and New Zealand Banking Group Ltd, which last week warned about increasing bad debt charges due to a downturn in the resources sector, fell 0.5 per cent.

Australia's materials sector also edged higher. Shares in Fortescue Metals Group Ltd saw some of the strongest gains, rallying more than 2 per cent after UBS said the iron ore miner has the capacity to reduce gearing to below 40 per cent by mid-2019.

Shares in BHP Billiton Ltd rose 0.3 per cent, while Rio Tinto Ltd rose nearly 0.5 per cent.

New Zealand's benchmark S&P/NZX 50 index edged up 0.16 per cent or 10.90 points to 6,687.23, continuing its steady rise as record low interest rates have lured investors away from bank deposits and toward higher yielding stocks.

The biggest gainers were consumer retailer the Warehouse Group, which rose 1.1 per cent and accounting software company Xero, which was up 1 per cent.

Z Energy gained 0.3 per cent as the fuel retailer extended its gains made on Tuesday on news it had settled its fuel dispute with New Zealand Customs.

The biggest losers were Vector, down 2.1 per cent and Meridian Energy, off 1.9 per cent.

REUTERS