Australian shares edge higher as mining rally offsets pressure on banks

Australian shares edged higher on Tuesday as gains in gold and base metal miners offset weakness in banks and consumer stocks after the central bank struck a cautious tone on inflation and policy easing.

The S&P/ASX 200 index rose 0.2% to 8,899.40, following a 0.8% drop on Monday.

Minutes from the Reserve Bank of Australia’s September meeting reinforced its cautious, data-dependent approach to inflation and spending ahead of its next policy decision in early November.

Markets now price roughly even odds of a November 4 rate cut and a 60% chance of one in December, down from 70% earlier after a stronger-than-expected inflation reading late last month.

The financials index slipped 0.5% to a two-week low, with three of the “Big Four” banks down as much as 1% each.

The slowing rate cut expectations are negative for banks primarily because lower interest rates boost the property market and home loans are a major bulk of revenue for the banks, said Junvum Kim, an Asia-Pacific senior sales trader at Saxo Markets.

“The RBA’s minutes of their September meeting have raised doubts that we may end the year without another rate cut, disappointing investors,” Kim said.

Consumer discretionary stocks fell 1% to their lowest since early August and were among the top drags.

On the other hand, the mining sub-index climbed about 2.5%, largely driven by gold miners that soared on bullion breaching $4,100 per ounce on U.S. rate cut prospects.

Northern Star Resources and Evolution Mining jumped 2.8% and 1.9%, respectively.

Rio Tinto jumped 1.8% after it reported a sequential rise in its quarterly shipments undefined of the commodity, but said it needs a stronger push in the final quarter to achieve its annual target

BHP Group added 2.2%, while Fortescue advanced about 1.8%.

New Zealand’s benchmark S&P/NZX 50 index fell 0.6% to finish the session at 13,276.99 points.