Financials drag Australian shares lower; inflation data on tap

Australian shares fell on Wednesday, after a three-session rally, led by heavyweight banks, while investors stayed cautious ahead of the August inflation data for cues into the Reserve Bank of Australia’s (RBA) policy path.

The S&P/ASX 200 index dropped 0.6% to 8,793.70 by 0025 GMT, after rising 0.4% on Tuesday.

The August consumer price index (CPI) data, due at 0130 GMT, is estimated to show a 2.9% year-on-year rise, up from 2.8% in July, Jimmy Tran, dealing manager at Moomoo Australia, said.

The release will be the final datapoint before the RBA meets next week and could shape expectations for a rate cut.

Traders are eyeing a 12.6% probability of a quarter-point RBA rate cut on September 30 versus a 60.4% chance in November.

Financials lost 0.8%, to become the biggest drag on the benchmark, with the “Big Four” banks losing between 0.4% and 0.7%.

The sub-index is set to lose nearly 2% so far this month as banks come under investor radar for their lofty valuations.

Technology stocks shed 1.1%, tracking losses in their Wall Street peers.

Logistics software maker WiseTech Global and accounting software firm Xero retreated 1.5% each.

Rate-sensitive consumer discretionary companies and real estate stocks declined 0.8% and 0.5%, respectively.

Bucking the trend, energy firms rose 0.6% on oil prices rising overnight as investor worries of a global oversupply subsided.

Index leaders Woodside Energy and Santos gained 0.6% and 0.8% respectively.

In New Zealand, the benchmark S&P/NZX 50 index was unchanged at 13,136.45.

Investors are awaiting the appointment of a new central bank governor at 0100 GMT.