[SYDNEY] Australian shares fell on Monday (Jul 21) to their worst session in more than three months, retreating from a record high scaled in the previous session as index heavyweight financials lost ground after last week’s sharp gains.
The S&P/ASX 200 index closed 1 per cent lower at 8,668.20, posting its biggest single-day decline since April 9. The index rose 1.4 per cent on Friday to a record close of 8,757.20.
Banks fell more than 2 per cent in their worst session since April 7 after a 1.6 per cent gain last week. Top lender Commonwealth Bank of Australia declined 2.5 per cent, shedding nearly 8 per cent since hitting a lifetime high in late June. The rest of the “Big Four” lenders lost between 2 per cent and 3.6 per cent.
“From a fundamental perspective, banks don’t look as attractive as miners do,” said Lochlan Halloway, equity market strategist at Morningstar, referring to banks’ stretched valuations and rotation into undervalued miners.
“From a valuation’s perspective, something of a rotation sort of makes sense, and I think we are seeing some of that playing out at the moment where miners are seeing strong flows at the expense of banks.”
Mining stocks closed at their highest since late February, led by a 4.5 per cent gain in South32 after the world’s largest manganese ore producer reported fourth-quarter output above analysts’ estimates.
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Index giant BHP recouped early losses to close 0.4 per cent higher. The stock underperformed its peers on a relative basis on the day after a “strong” 3 per cent gain on Friday following an upbeat quarterly production report, said Glyn Lawcock, head of metals and mining research at Barrenjoey.
Interest rate-sensitive real estate and consumer discretionary stocks fell 0.9 per cent and 1.2 per cent, respectively.
New Zealand’s benchmark S&P/NZX 50 index climbed 0.6 per cent to 12,961.51, its highest close since mid-February.
The country’s annual consumer inflation accelerated in the second quarter but was below economists’ forecasts, data showed, leading markets to narrow the odds on a rate cut next month. REUTERS
