Australian shares close lower after Fed signals policy tightening

Australian shares closed lower on Thursday, with mining and energy stocks leading the declines, as the US Federal Reserve signalled that it was considering changes to its dovish policy earlier than expected.

The S&P/ASX 200 index ended 0.37% lower at 7,359.0.

Wall Street and Asian equities dropped after the Fed forecasts, or dot plots, showed 13 of the 18 person policy board seeing rates rising in 2023 versus only six previously, while seven tipped a first move in 2022.

Meanwhile, Australian job creations comfortably beat expectations in May as unemployment dived to pre-pandemic lows, testing the domestic central bank's commitment to continued stimulus.

Reserve Bank of Australia Governor Philip Lowe in a speech acknowledged that the economy had picked up faster than expected but said it was still recovering, and would need continued stimulus for some time.

"Our view is that the (Reserve) Bank could announce LSAP (Large Scale Asset Purchase) worth up to A$100 billion, which would be a flexible program that allows the Bank to alter purchases without the adverse signalling impact of a hard taper announcement," Citi Research said in a note to clients.

Mining stocks fell 2%, with gold stocks dropping more than 4%, as metal prices weakened overnight, although prices recuperated slightly later.

Global miners BHP Group and Rio Tinto lost 1.4% and 1.2%, respectively.

Energy stocks lost 1.9% as oil prices fell against a stronger greenback.

Financials rose, with the so called "big four" banks gaining between 0.6% and 1.5%.

Broadcaster Seven West Media jumped more than 26% after forecasting a 97% jump in adjusted earnings for fiscal 2021, as its advertising revenue strengthened.

New Zealand's benchmark S&P/NZX 50 index fell 0.3% to 12,541.2 as the country posted a faster-than-expected first-quarter economic growth data, prompting fears of policy tightening.