Australian Shares Reach Two-Month High as Mining and Energy Stocks Rally

Australian shares rose to a two-month closing high on Wednesday, driven by strong performance in mining and energy sectors despite weakness in major banking stocks. The S&P/ASX 200 finished 0.14% higher at 8,820.60 points, marking its strongest closing level since November 10.

Mining Sector Leads Market Gains

The mining sub-index delivered the strongest performance, jumping 0.9% to its highest closing point as commodity prices strengthened. The sector moved in tandem with copper prices, which scored a record high during the session.

Mining Stock Performance:	Gain (%)
BHP:	+1.1%
Rio Tinto:	+0.8%
Newmont Corp:	+2.0%
Northern Star Resources:	+1.4%
Evolution Mining:	+0.7%

Gold miners particularly benefited from bullion prices hitting lifetime highs. Local shares of top gold producer Newmont Corp advanced more than 2% to scale a fresh peak, while domestic producers Northern Star Resources and Evolution Mining posted solid gains.

Banking Sector Under Pressure

Financials moved in the opposite direction, slipping 0.7% as all "Big Four" banks declined. Top lender Commonwealth Bank of Australia lost 1.3% to end at its lowest level since mid-December, while other major banks shed between 0.3% and 1.1%.

Banking Sector Impact:	Details
Sector Performance:	-0.7%
Commonwealth Bank:	-1.3% (lowest since mid-December)
Other Major Banks:	-0.3% to -1.1%
Rate Hike Probability:	27% chance of 0.25% increase on February 3

According to Craig Sidney, senior investment adviser at Shaw and Partners, banks continue to face selling pressure amid expectations of an increase in key cash rates this year. Rich valuations and a realignment of the monetary policy path following sticky inflation have prompted a rotation out of the banking sector in recent weeks. Swaps indicate a 27% chance that the Reserve Bank of Australia will raise the 3.6% cash rate by a quarter point when it meets on February 3.

Energy Stocks Surge

Energy stocks delivered strong performance, adding 2.3% with Santos and Woodside Energy both climbing nearly 3% each. The sector benefited from firmer commodity prices and investor rotation from banking into resource stocks.

"There's certainly a bit of money going into the likes of BHP and Rio Tinto," Sidney noted, highlighting the sector rotation trend.

Regional Market Performance

In New Zealand, the benchmark S&P/NZX 50 index ended 0.7% higher at 13,757.71 points, reflecting positive sentiment across the region's equity markets.

Australian shares staged a recovery on Wednesday, rebounding from the three-week low reached in the previous session. The S&P/ASX 200 index gained 0.20% to finish at 8,695.60, recovering from Tuesday's 0.50% decline that marked the benchmark's weakest performance in three weeks.

Mixed Inflation Data Influences Market Sentiment

The market's performance came against the backdrop of mixed inflation signals from local economic data. Consumer prices rose by less than forecast in November, providing some relief to investors. However, a closely watched core inflation gauge remained above the Reserve Bank of Australia's 2%-3% target range, indicating persistent inflationary pressures that could warrant monetary policy intervention.

Inflation Metrics:	Status
November CPI Growth:	Below forecast
Core Inflation:	Above RBA 2%-3% target
Rate Hike Probability (February):	35% (up from 30%)

The focus now shifts to the quarterly inflation measure expected later this month, which will significantly influence the Reserve Bank of Australia's first monetary policy meeting of 2025 in mid-February. Market swaps indicate a 35% probability of a quarter-point rate hike next month, an increase from approximately 30% before the inflation data release.

Banking Sector Under Pressure

Financial stocks bore the brunt of rate hike concerns, with the sector declining 1% to reach a four-week low. The performance was particularly weak among Australia's major banking institutions.

Banking Performance:	Change
Big Four Banks (3 of 4):	Down 1.5% to 2%
Commonwealth Bank (CBA):	Down 1.7% (four-week low)
Overall Financials Sector:	Down 1%

Greg Boland, market strategy consultant at Moomoo Australia, noted that "the earlier market pricing of further cuts in 2026 is being revised out of the curve, and odds of a hold or even modest hikes now outweigh fresh cuts in the near term."

Mining Sector Reaches New Heights

In stark contrast to the banking sector's struggles, mining stocks delivered exceptional performance, rising 1.20% to achieve a record high. The sector benefited from stronger commodity prices, with major players posting significant gains.

Mining Stocks Performance:	Change	Achievement
BHP:	+1%	Near two-year high
Rio Tinto:	+1.6%	Third consecutive record
Lynas Rare Earths:	+14.5%	Surge on China export ban
Overall Mining Sector:	+1.2%	Record high

Lynas Rare Earths, the world's largest rare-earths producer outside China, experienced a remarkable 14.50% surge following China's decision to ban exports of certain rare-earth elements to Japan, highlighting the geopolitical dynamics affecting commodity markets.

Regional Market Performance

The positive sentiment extended beyond Australia's borders, with New Zealand's S&P/NZX 50 climbing 0.40% to reach a record closing high of 13,715.02, demonstrating broad-based strength across the Australasian region.