Australia shares hit lowest in over a month as RBA holds rates, signals caution

Australian shares finished at their lowest in more than a month on Tuesday (Nov 4) after the central bank left its key rate unchanged as expected and signalled a cautious stance on further easing, pressuring equities already burdened by stretched valuations.

The S&P/ASX 200 index ended 0.9 per cent lower at 8,813.70 points, its lowest closing level since Sep 26, after a short-lived rebound post-decision gave way to late afternoon declines.

The Reserve Bank of Australia left its key cash rate unchanged at 3.6 per cent as widely anticipated and warned of inflationary pressures ahead, signaling little chance of near-term easing.

The central bank’s cautious tone dampened appetite for equities, with valuations stretched in certain pockets, especially in banks trading at among the highest multiples versus developed market peers.

“The RBA’s cautious stance may dampen some of the optimism that has fuelled equity gains. With the major banks reporting this week, investors will be closely watching for signs of margin pressure and softer credit growth,” said Marc Jocum, a senior product and investment strategist with Global X ETFs.

“A sustained move for the ASX 200 benchmark beyond 9,000 may be difficult without clearer evidence of disinflation, stronger Australian earnings growth, or a more dovish policy outlook.”

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The financials sub-index ended 0.4 per cent lower, dragged by a 0.8 per cent drop in top lender Commonwealth Bank of Australia .

Westpac extending its gains and setting a fresh lifetime high for the second day limited some losses. The lender ended 1.5 per cent higher at A$40.420 (S$34.31) apiece.

Miners lost 1.8 per cent to finish at one-month low, with top iron ore miners Rio Tinto, BHP, and Fortescue shedding between 1.9 per cent and 2.7 per cent.

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Gold stocks fell 0.8 per cent as bullion held under the US$4,000 per ounce mark on a resilient dollar. The sub-index remains the top performer this year with 85 per cent gains year-to-date.

Energy stocks also slipped 0.9 per cent. Major oil and gas producers Woodside Energy and Santos shed 0.7 per cent and 0.6 per cent, respectively.

New Zealand’s benchmark S&P/NZX 50 index gained 0.4 per cent at 13,605.96 by session-end. REUTERS