Australian shares end lower as inflation warnings cloud rate-cut bets
Traders scale back rate-cut expectations
Australian financials down 0.4%
QBE Insurance falls to three-week low
Updates to close
By Prerna Bedi
June 19 (Reuters) -Australian shares closed lower in subdued trade on Wednesday, pulled down by losses in heavyweight financials, as investors dialled back their expectations on rate cuts after the central bank emphasised the need to be vigilant on inflation.
The S&P/ASX 200 index .AXJO was down 0.1% at 7,769.7 points at the close of trade. The benchmark ended 1% higher on Tuesday.
The Reserve Bank of Australia (RBA) kept its interest rate steady on Tuesday, but reiterated it was open to hikes in the future due to sticky inflation, prompting investors to scale back their rate-cut probabilities.
"The hawkish hold from the RBA has seen a small chance of a rate hike factored-in for the Aug/Sept meetings and beyond that, rate cuts are being pushed further into the future," Westpac analysts wrote in a note.
Brad Smoling, managing director at Smoling Stockbroking, is of the view that the RBA's decision to stand pat on interest rates will "put a lot of pressure on banks, financials and listed property companies".
Market participants now do not expect a rate cut until April next year. Commonwealth Bank of Australia CBA.AX, the country's top bank, expects the easing cycle to begin in November, while smaller peer ANZ ANZ.AX shifted its expectations of a first rate cut to next February from November 2024.
On the bourse, financial stocks .AXFJ, which are sensitive to the rate cycle, dropped 0.4%, with three of the "Big Four" banks down between 0.4% and 0.6%.
Shares of National Australia Bank NAB.AX were up 0.4%.
QBE Insurance QBE.AX touched a three-week low after the general insurer said it would close its struggling North America middle-market segment at a $100 million before tax cost.
Miners .AXMM closed flat, while gold firms .AXGD were up 1.1% as bullion prices edged higher as U.S. rate-cut bets burnished bullion's appeal.
Energy stocks .AXEJ advanced nearly 1%, buoyed by steady oil prices amid escalating conflicts in Europe and the Middle East.
New Zealand's benchmark S&P/NZX 50 index .NZ50 ended 0.8% lower, after slipping to a 12-session low of 11,648.4 points earlier in the day.
Reporting by Prerna Bedi in Bengaluru; Editing by Sherry Jacob-Phillips
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