Australian shares remain over 1% lower after GDP data, NZ hikes rates

Australian shares remained more than 1% down on Wednesday after second-quarter economic growth slowed, though not enough to deter expectations of another interest rate hike, while New Zealand’s central bank raised rates as expected.

The S&P/ASX 200 benchmark index was down 1.1% at 8,967 points, as of 0243 GMT, recovering slightly from its session low of 8,935.10 points.

The index was on track for its worst session in nearly three months, if current momentum persists.

In New Zealand, the benchmark S&P/NZX 50 index inched higher after the central bank raised its official cash rate by 25 basis points to 2.75%, continuing its efforts to curb inflation.

The index was last up 0.2%.

The Reserve Bank of New Zealand also signalled further policy tightening was likely, but stressed that any additional rate hike would be gradual.

Westpac New Zealand Chief Economist Kelly Eckhold described the statement as “appropriately balanced” and continued to forecast the central bank would keep rates unchanged in October before delivering another hike in December.

Australia’s economy grew at a slower pace in the second quarter, but still exceeded market expectations and remained above the 2% pace the central bank believes can be sustained without fuelling inflation.

“Today’s resilient GDP print is the final green light the RBA needs to hike rates for a fourth time this year,” Tony Sycamore, a market analyst at IG, wrote in a note.

Concerns over oil supply disruption and inflation stemming from the renewed US-Iran conflict remain front and centre for investors, prompting markets to price in a near 60% chance of a rate hike by the Australian central bank later this month.

On the Sydney bourse, miners tumbled 3.8% to mark their worst session in more than two months.

Iron ore giants BHP Group, Rio Tinto, and Fortescue fell more than 2% each.

Gold stocks slumped nearly 5% as tepid gold prices hit over a three-week low. Real estate stocks were down 1.3%, while consumer discretionary firms slipped 0.2%.

Financials were largely unchanged, while consumer staples index inched higher.