Australian shares retreat on weak miners, banks ahead of rate call

By Reuters News

By Nikita Maria Jino and Shravya Marakini

- Australian shares snapped two straight sessions of gains to close lower on Monday, led by miners and financials, as investors braced for a rate hike that is expected to take borrowing costs to their highest level since 2008.

The S&P/ASX 200 index .AXJO ended down 0.6% at 8,856.50.

The resources sub-index .AXMM logged a 1.5% fall in its third consecutive session of losses, mirroring the recent weakness in copper prices. MET/L

Investor appetite for the red metal, expected to benefit from tech-related infrastructure expansion, has been dented by worries that heavy spending on AI may not generate sufficient returns.

"Copper has become a stand-in for the AI build-out, so when chip stocks get hammered on Wall Street, the metal tends to go down with them, and that explains most of today's move in the miners," said Josh Gilbert, lead APAC and Middle East analyst at eToro.

BHP BHP.AX and Rio Tinto RIO.AX closed down 1.4% and 1.2%, respectively.

Banking stocks .AXFJ gave up early gains to tick 0.6% lower. Westpac, Australia's second-largest home lender by assets, warned of a housing market downturn steeper than any seen in nearly two decades. Its credit impairment charges doubled, but annual adjusted profit met market expectations.

Mortgage applications at major lenders have fallen after the Australian government's decision to scrap property tax concessions earlier this year alongside multiple rate hikes.

Westpac WBC.AX ended 1% higher after falling as much as 1.3% earlier in the session. The remaining "Big Four" banks lost between 0.6% and 1.5%.

Meanwhile, a Reuters poll showed the Reserve Bank will raise its cash rate for the fifth time this year to 4.85%, its highest since December 2008, to combat stubborn inflation despite a softening labour market.

"From the RBA standpoint, the board doesn't have much choice tomorrow," Gilbert said, adding that he expects the board to keep the door for further tightening "firmly open".

Elsewhere on the index, healthcare stocks .AXHJ declined 0.8% while the energy sub-index .AXEJ slipped 0.1%.

New Zealand's benchmark S&P/NZX 50 index .NZ50 inched 0.7% lower to 13,698.63 at close.

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