Australian shares shed early gains to close flat on Wednesday as a slump in commodity stocks offset a jump in financials, with risk appetite also subdued ahead of upcoming US inflation data.

The S&P/ASX 200 index closed 0.04% higher at 6647.5, after having dropped in each of the three previous sessions.

Financial stocks snapped a four-session losing run to jump 1.9%, with the “big four” banks surging between 1.2% and 4.0%.

US inflation data –– producer price data due later in the day and CPI data due Thursday –– is expected to keep the US Federal Reserve on its aggressive interest rate hike path.

At face value, rate hikes tend to bode well for banks as it often leads to higher net interest margins and profitability. “Financials have a chance to benefit if recession worries compel the Fed and other central banks to re-think their extremely stubborn hawkish monetary policy stance,” said Kunal Sawhney, CEO of Kalkine Group.

Major central banks globally have been raising rates to curb inflation and are expected to continue to do so into next year, igniting fears the moves could lead to a recession.

Reserve Bank of Australia Assistant Governor Luci Ellis emphasized the country’s neutral rate, which is at least 2.5%, was a moving target and hard to determine at any stage of time, further limiting its usefulness for monetary policy.

Australian shares gain as miners outweigh losses in energy stocks

Among commodity stocks, miners lost 1%, with BHP , Rio Tinto and Fortescue Metals shedding between 0.8% and 3%.

However, Lake Resources jumped 2% after signing a lithium supply deal for a project in Argentina.

Energy stocks retreated 1.5% as oil prices remained pressured by demand woes in China due to tightening COVID-19 curbs.

Woodside Energy and Santos fell 1.9% and 2.5%, respectively.

Queensland Pacific Metals soared 16.7% after General Motors said it will invest up to $69 million for a stake in the company. New Zealand’s benchmark S&P/NZX 50 index lost 0.8% to 10873.2.