Australia shares end at near two-month high, led by banks, energy stocks

By Aamir Khalid

Oct 29 (Reuters) - Australian shares closed at their highest level in nearly two months on Thursday, led by banks on domestic rate hike expectations and energy stocks as oil prices held above $100 per barrel.

The benchmark S&P/ASX 200 index .AXJO finished 0.5% higher at 8,891.80 points, its highest closing level since September 9.

Financials .AXFJ jumped 1.9% to their highest level in since early-August. All the "Big Four" banks clocked gains between 1.9% and 2.3%.

Banks have added nearly 2% over the last two days. Markets are pricing in an almost nearly 82% chance of Reserve Bank of Australia rate hike on November 3, up from 25% a couple of weeks ago, after the quarterly inflation data came in hot on Wednesday. 0#AUDIRPR

Higher rates may initially boost bank margins, but they threaten to dent borrowing capacity and demand over the longer haul.

Miners .AXMM slipped 0.7%, snapping a three-day winning streak.

Heavyweights, BHP BHP.AX and Rio Tinto RIO.AX dropped 0.9% and 0.6% respectively.

"ASX lithium stocks are weak today as falling Chinese lithium prices and concerns about additional supply returning to the market are weighing on sentiment and prompting investors to take profits across the sector," said Philip Pepe, senior equities analyst at Shaw and Partners.

Local lithium miners PLS Group PLS.AX and Core Lithium CXO.AX were down 8% and 4.3% each.

Gold miners .AXGD, on the other hand, rose 0.2% in the index's fourth straight session of gains. Evolution Mining EVN.AX added 0.4%.

Energy stocks .AXEJ surged 1.4%, with sector majors Woodside Energy WDS.AX and Santos STO.AX up 1.9% and 1.2%, respectively. Oil prices held above $110 per barrel after it paring previous session's gains. O/R

Elsewhere, the US Federal Reserve held rates steady as widely expected, ahead of next week's midterm elections while it awaits further inflation data.

The New Zealand benchmark S&P/NZX 50 index .NZ50 was up 0.l% at 13,710.17 points. Its central bank governor Anna Breman said the chances of policy tightening in December are "high", a day after it unexpectedly held rates steady.