Australian shares fall as central bank keeps rates unchanged
The Australian share market fell on Tuesday, as financials and energy stocks were dragged down after the central banks kept interest rates unchanged as expected. They also struck a cautious policy tone that tempered risk appetite while clouding short-term easing expectations.
The S&P/ASX 200 Index fell 0.2% to 8,848.8 after earlier rising up to 0.3% at a high of four weeks.
The benchmark ended a five-month streak of gains, dropping 1.4% in the month of September. This was its worst performance since March.
Reserve Bank of Australia has left its key rate at 3,6% and indicated that further reductions are unlikely, unless the economy falters. This is despite earlier rate cuts in this year having boosted spending and housing demand. The Reserve Bank of Australia warned that inflation could be more persistent than anticipated, leading many forecasters and policymakers to delay the next rate cut until mid-2026.
Shane Oliver is the head of investment strategy at AMP and the chief economist. He expects that the benchmark will move sideways during the last quarter with a slight risk of correction. The RBA's cautious tone has investors on edge despite the usual year-end strength.
Banks dropped 0.5% with Commonwealth Bank dropping 0.9%. The sub-index has fallen 1.5% in September after a gain of 3% in August.
CBA has been a target for analysts because of its premium valuation. However, the stock's dominant position on the market and high capital returns have helped it to defy repeated "sell" recommendations, according to Philip Pepe. Senior equities analyst with Shaw and Partners.
He added that the Tuesday drop was likely due to profit-taking and not a fundamental change.
Oil prices have eased, causing energy shares to fall 1.6%. This is the lowest level in a full week. Beach Energy and Karoon Energy both fell by more than 3%.
Iron ore prices rose by 1%, boosting the miners to their highest level since January.
Star Entertainment's stock jumped up to 4.5% following the waiver of a loan covenant in order to avoid breaching agreements.
New Zealand's S&P/NZX 50 Index rose 1.2% to 13,292.4. This is its highest level since October 2021.
(source: Reuters)
