SYDNEY: Australian shares rose on Friday to log their third week of consecutive gains, helped by gains in banks and discretionary stocks ahead of inflation data next week that is expected to lead to lower interest rates.

The S&P/ASX 200 benchmark index closed 0.4% higher at 8,408.9 points. The index has risen 1.2% this week, its best performance in a month, and has gained nearly 2% in the past three weeks.

Traders are anticipating the fourth-quarter inflation print next week to solidify market expectations that the Reserve Bank of Australia will cut borrowing costs to 4.10% in its February meeting. Those odds now stand at 78%.

“Estimates for inflation are now pointing in the right direction, suggesting that inflation will be closer to the target than anticipated,” said Jessica Amir, market strategist at trading platform Moomoo.

“This will likely put pressure on the RBA to cut interest rates.”

Rate-sensitive financials rose 0.3%, with three of the “Big Four” banks up between 0.1% and 0.7%. ANZ ended flat.

A potential rate cut would also mean an increase in consumer spending, helping the retailers boost their earnings.

Discretionary stocks jumped 2.1%, with conglomerate Wesfarmers adding 3.6%.

Miners were initially trading lower but ended the day 0.1% higher on rising iron ore prices.

Sentiments also improved after US President Donald Trump said his conversation with Chinese President Xi Jinping was friendly and the two countries could reach a trade deal.

BHP, Rio Tinto and Fortescue all ended the session in the green.

Gold stocks fell 1%, extending its loss from Thursday, despite bullion prices soaring to a near three-month high

New Zealand’s benchmark S&P/NZX 50 index dipped by 0.3% to 13,024.7 points.

However, Synlait Milk bucked the trend, surging over 19% to a five-month high on the back of a projected return to profitability by 2025.