NewsGlobalAustralian Shares Rebound from Three-Week Low as Miners Surge, Banks Decline on Inflation ConcernsAustralian Shares Rebound from Three-Week Low as Miners Surge, Banks Decline on Inflation Concerns
Australian shares recovered on Wednesday with the S&P/ASX 200 gaining 0.20% to 8,695.60, rebounding from a three-week low. Mining stocks drove the recovery, rising 1.20% to record highs on stronger commodity prices, while banking stocks declined 1% to four-week lows amid persistent inflation concerns. Core inflation remaining above the RBA's target range has increased rate hike probabilities to 35% for February, weighing on financial sector performance.
*this image is generated using AI for illustrative purposes only.
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.
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