Australia shares close higher on financials, tech stocks under pressure

Financials helped Australian shares post gains for the second straight session on Tuesday even as technology stocks extended falls after their Wall Street peers were sold off overnight on concerns over steep valuations.

The S&P/ASX 200 index rose 0.5%, adding to Monday's 0.4% gain.

Overnight, the tech-heavy Nasdaq index entered correction territory, as rising US 10-year Treasury yields in recent weeks amid higher inflation views dented the attractiveness of equities and raised worries over lofty valuations.

Technology stocks in Australia fell 1.7% to close at a five-month low, clocking their sixth consecutive losing session.

"There's a lot of fast money leaving the market that's been involved in the buy-now-pay-later sector. Some of those tech stocks are seeing people unwind their positions," said Henry Jennings, a senior analyst at Marcustoday Financial Newsletter.

The recent spike in bond yields is eroding confidence in growth stocks, he added. "People are all trying to get out at the same time, it's been a sector that's very hot."

Buy-now-pay-later heavyweight Afterpay Ltd, which had a meteoric 88% rise in 2020, shed about 3.6%. Software companies Megaport and Xero fell 4.4% and 3.8%, respectively.

Financial stocks supported the index with a 1% gain. A better-than-expected economic recovery, a strong housing market and easing margin pressures have supported the sector.

The "Big Four" banks climbed between 0.7% and 1.3%, while wealth manager IOOF gained the most with a 4.6% rise.

Shares of Insurance Australia Group, the country's largest general insurer, cut losses to end about 4% lower after it said it had no net exposure to supply chain finance firm Greensill Capital which filed for insolvency.

Vocus Group closed at a more than four-year high, after it agreed to a A$3.5 billion ($2.68 billion) takeover offer from a consortium of a Macquarie fund and pension fund Aware Super.

New Zealand's benchmark S&P/NZX 50 index ended 0.5% higher.