Australian shares end lower as central bank flags rate hikes

Australian shares closed on Friday at their lowest level in more than a week, with miners leading the losses amid tepid iron ore prices, while risk appetite took a hit after the central bank flagged more interest rate hikes to tame inflation.

The S&P/ASX 200 index closed 1.4% lower at 6,747.00 points.

The benchmark lost 2.1% this week. Reserve Bank of Australia (RBA) Governor Philip Lowe said interest rates are closer to normalisation after a successive run of outsized hikes, although he warned rates are still low to bring inflation back to the bank’s 2%-3% target range.

“The hope for peaked inflation ignited by the surprising rise in the unemployment rate has been doused entirely by RBA Chair Lowe’s speech today,” said Hebe Chen, market anaylst at IG markets.

“We can expect rates to stay higher for longer,” said Jessica Amir, market strategist at Saxo Capital Markets, adding that the market has priced in a 0.25% hike by the RBA next month.

Australian shares climb on energy boost, unemployment rate in focus

Miners slipped 2.4% to touch a one-week low, tracking a drop in iron ore prices. The sub-index lost 2.4% for the week.

Rio Tinto, BHP Group and Fortescue Metals slumped between 1.7% and 2.3%. Financials retreated 0.8% in their fifth straight weekly fall. Commonwealth Bank of Australia and Australia and New Zealand Banking Group shed 0.9% and 0.8%, respectively.

An overnight dip in crude prices dragged Australian energy stocks down 3% in their third consecutive weekly loss.

Woodside Energy and Santos fell 2.9% and 2.4%, respectively.

Meanwhile, a raft of US economic data further dented sentiment as it failed to alter the expected course of aggressive tightening by the Federal Reserve.

Data showed that U.S retail sales unexpectedly rebounded in August, while the number of people filing for new claims for unemployment benefits fell to its lowest in more than three months.

In New Zealand, the benchmark S&P/NZX 50 closed 0.7% lower at 11,580.46 points, marking its worst week since June 17.