Australian shares drop as miners and financials weigh; Fed, RBA meetings in focus

Australian shares ended down on Monday, slipping from a nine-month high hit in the previous session as miners and banks fell, while investors awaited US Federal Reserve’s interest rate decision and the local central bank’s upcoming policy meeting. The S&P/ASX 200 index finished 0.2% lower at 7,481.700, below Friday’s closing level of 7,493.80, its highest since April 22.

Investor will be closely eyeing the Fed meeting later this week following data indicating economic resiliency, providing it room to further slow the pace of its most aggressive monetary tightening. Commenting on the previous upward trend in Australian shares, Henry Jennings, senior analyst and portfolio manager at Marcustoday Financial Newsletter, said it was possible that the Australian benchmark will hit an all-time high by Easter.

Australian shares snap five-day rally after hot inflation data

“It is possible we have seen peak inflation and that the Fed and other central banks will raise there rates one more time and maybe then pause a little bit.” The Reserve Bank of Australia (RBA) is widely expected to raise rates by a quarter-point next Tuesday, with analysts at Westpac expecting similar hikes in March and May meetings, as domestic inflation pressures are seen subsiding through 2023. Among sectors, export-reliant miners were the biggest drag on the index after sliding 0.3%.

Rio Tinto lost 1.2% as its iron ore division chief apologised after a contractor lost a radioactive capsule in transit in Western Australia, which sparked a radiation alert across parts of the state.

Financials plunged 0.3%, while healthcare stocks also ended in the red.

Tech stocks, however, chased Nasdaq higher after gaining 2.3%. New Zealand’s benchmark S&P/NZX 50 index was flat at 12,034.17.

Major insurers operating in New Zealand have cumulatively received more than 9,000 claims so far following severe storms and flooding in and around the biggest city, Auckland.