Bank selloff drags Australian shares lower

By Reuters News

By Nichiket Sunil

Oct 14 (Reuters) - Australian shares slid on Wednesday as index heavyweight banks retreated on mounting concerns about the sector's exposure to high borrowing costs, a housing market slowdown and pressure on household finances.

The S&P/ASX 200 index .AXJO fell 0.6% to close at 8,727.90 after ending flat on Tuesday.

Financials .AXFJ pulled back 1.4% after three consecutive sessions of gains, as Commonwealth Bank of Australia CBA.AX slid 2.2%, while the other three 'Big Four' lenders fell between 0.2% and 1.8%.

The weakness followed mixed quarterly results from Wall Street banks overnight, which suggested that bond market volatility and uncertainty stemming from the Iran crisis may be weighing on dealmaking activity.

For Australian banks, the latest selloff reflects persistent concerns about a challenging operating environment marked by elevated interest rates, a cooling housing market and imported inflation that continues to squeeze consumers.

Those concerns were reinforced by minutes from the Reserve Bank of Australia's September policy meeting released on Tuesday, which showed policymakers still see risks that inflation could prove more persistent than expected.

"Wall Street's mixed banking results have added to the negative sentiment toward the local banks today, but I think the bigger issue for Australian banks is the deteriorating domestic earnings outlook," said Grady Wulff, a senior market analyst at Bell Direct.

Mining stocks .AXMM fell 0.9%, with gold producers .AXGD among the biggest decliners after bullion prices steadied following losses in the previous session. GOL/

Energy stocks .AXEJ rose 0.8% as oil prices gained on Middle East worries. Santos STO.AX climbed 1.4% to post its highest close since November 2014.

Glencore's GLEN.L, Australian shares ended their first trading session at A$11.23, below their opening level. The company's CHESS Depositary Interests opened at A$11.44, a small premium to the stock's London close.

New Zealand's benchmark S&P/NZX 50 index .NZ50 rose 0.1% to 13,760.39.

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