Australian shares fell on Wednesday, led by commodity-related stocks and banks as upbeat US data dampened hopes of early interest rate cuts ahead of a Federal Reserve policy decision due later in the day.

The S&P/ASX 200 index fell 1.3% to 7,561.600 by 0025 GMT, after closing 0.4% higher on Tuesday.

Data showed US labour costs increased more than expected in the first quarter amid a rise in wages and benefits, confirming the surge in inflation early in the year that will likely delay a much-anticipated rate cut later this year.

Almost 99% of the market expects the Fed to cling onto its cash rate on Wednesday, according to the CME Group’s FedWatch tool.

In Sydney, investors assessed March retail sales data, which showed that consumers cut back on spending amid rising interest rates.

In the resources-heavy benchmark index, commodity stocks tumbled, weighed down by lower iron ore and oil prices.

Mining stocks fell 2.2% as they took the brunt of a sell-off in China ahead of a holiday. BHP Group lost 1.6%, while Rio Tinto dropped 1.2%.

Australian shares hit record high; RBA cautious on inflation

Energy stocks lost 2.2% after global oil prices fell on growing hopes of an Israel-Hamas ceasefire. Oil and gas giant Woodside Energy dropped 1.6%, while smaller peer Santos slid 1.3%.

Financials fell 1%, with the “Big Four” banks down between 0.7% and 0.9%.

Healthcare stocks shed 0.7%, with Australia’s priciest stock CSL down 0.6%.

Real estate and information technology stocks slipped 1.7% and 2.1%, respectively.

In New Zealand, the benchmark S&P/NZX 50 index fell 0.7% to 11,877.5300.