Australian shares ended higher on Thursday as a sharp overnight rebound in iron ore prices boosted miners, though banking stocks capped gains after the country’s solid jobs data and U.S. inflation strengthened the prospects of further interest rate hikes.
The S&P/ASX 200 closed 0.4% higher at 6,650.60 points, extending gains to a third consecutive session. The benchmark had risen 0.2% on Wednesday.
Australia’s unemployment rate dived to a 48-year low in June, far exceeding market expectations, and hotter-than-expected U.S. inflation data fuelled worries about further aggressive interest rate hikes by the Federal Reserve.
“Today’s data supports our view for the RBA (Reserve Bank of Australia) to get to neutral sooner rather than later and, indeed, will raise the prospect that they may need to move into restrictive territory,” said Su-Lin Ong, chief economist at RBC Capital Markets.
The domestic market has priced in a 50 basis points (bps) hike, and Ong expects markets to increasingly price in the risk of 75 bps at the August meeting.
Miners led gains on the local bourse, jumping 1.8% and snapping a three-day losing streak after iron ore prices rebounded overnight on China’s positive exports data for June.
New Zealand shares end higher after expected rate hike, Australia stocks rise
BHP, Rio Tinto and Fortescue Metals gained between 1.3% and 2.5%.
Coal miners New Hope and Whitehaven Coal were the top advancers on the energy sub-index, gaining 5.7% and 6.5%, respectively. Local media reported China may be preparing to reverse its unofficial ban on Australian coal imports.
Bucking the trend, financials slipped 0.8% in their worst day since June 30. Commonwealth Bank, National Australia Bank, Westpac and Australia and New Zealand Banking Group declined between 0.5% and 2.2%.
New Zealand’s S&P/NZX 50 ended 0.7% higher at 11,187.97 points. Payments platform Pushpay and building materials supplier Fletcher Building were among the major gainers.
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