Australian shares fell for the fifth straight session on Monday as investors dumped banking shares after a lacklustre earnings season and on uncertainty around Tuesday's federal budget. The market opened more than one percent higher following China's latest interest rate cut at the weekend but soon ran out of puff, with selling pressure on major banks, supermarkets Woolworths and Wesfarmers and Telstra.
Gains in miners and energy-related shares capped steep losses. The S&P/ASX 200 index fell 0.17 percent, or 9.4 points, at the close of trade to 5,625. The benchmark fell 0.2 percent on Friday. Last week was its worst weekly performance in nearly two years on weak trade data from China and a sluggish domestic economy. New Zealand's benchmark NZX 50 index rose 0.22 percent or 12.6 points to finish the session at 5,747.95.
"Market watchers are preparing for the inevitable negativity surrounding the budget due to comments in the Reserve Bank of Australia statement," said Mark Lennox, senior private client advisor at HC Securities. "The comments relate to lacklustre public spending and the under-represented effects of a sell-off in bulk commodity prices on the nation's finances."
Australian Prime Minister Tony Abbott, facing growing pressure to call early elections, is expected to take a far more cautious tack in the conservative government's second budget on Tuesday after a politically disastrous plan last year. BHP Billiton, up 1.5 percent, and Fortescue, up 4.5 percent, sent the index higher while energy shares such as Origin and Oil Search rose about 3 percent each.
Major banks traded in the red with Commonwealth Bank and ANZ Banking Group falling about 1 percent. Australian banks had a downbeat reporting season last week, with investors expecting lower profit growth and dividends this year. New Zealand's Meridian Energy rose 1.5 percent ahead of a deadline later this week for the final payment for pre-paid shares, adding to its recovery from a steep sell-off seen in the past month or so. Air New Zealand gained 1 percent, while Contact Energy rose 0.7 percent. Cloud accounting software maker Xero rose 2.3 percent to NZ$19.75 ($14.63), after a slide late last week to a 2 1/2-month low of NZ$18.58, a low point in its sell-off from NZ$26.49 hit in March, that prompted investors to pick up shares.