ASX ends 0.6% lower as RBA hints at faster rate hike; bank stocks fall

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ASX ends 0.6% lower as RBA hints at faster rate hike; bank stocks fall

The ASX 200 ended 0.6% lower on Tuesday
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Highlights

  • The ASX ended 0.63% lower on Tuesday on rate hike concerns.
  • Six of the 11 sectors fell, led by materials and financial stocks.
  • Whitehaven Coal, IGO, and Champion Iron emerged as top losers on the ASX.
  • All big four lenders – Westpac, CBA, ANZ and NAB - ended lower.
  • The Reserve Bank kept interest rate unchanged, but scrapped yield curve control.

 Australian shares ended lower on Tuesday after the country’s central bank signalled that interest rate could be raised sooner than expected. In a major shift in its policy stance, the Reserve Bank has decided to discontinue one of its key stimulus measures, “yield curve control”, which was introduced in March 2020, following the COVID-19 pandemic outbreak. Investors were also cautious in light of the central bank meetings in the United States and Britain this week.

The benchmark ASX 200 index ended 46.50 points or 0.63% lower at 7,324.30. The index opened lower today and dropped as much as 0.8% during the session, crossing below its 125-day moving average.  

The Reserve Bank of Australia (RBA) on Tuesday kept its cash rate target at record low 0.1% for the twelve consecutive month. The central bank also reaffirmed its commitment to continue buying AU$4 billion worth of government bonds every week until mid-February.

However, in a surprise move, the central bank discontinued the target for the yield on the April 2024 bond, citing improvement in economy. The apex bank scrapped the policy of targeting the yield on the three-year Australian government bond, maturing in April 2024 at 0.1%.

Financial and material stocks drag ASX lower

Six of 11 sectors ended in red, led by materials and financials

Image source: © Stbernardstudio   | Megapixl.com

The market width, indicating the overall strength, was weak as six of 11 sectors ended in red zone, led by material and financial indices. The material sector was the worst performer with a 2.1% loss, owing to a fall in commodity prices, especially iron ore.

The Material sector was followed by 1.3% loss in the financial sector as looming fears  about rate hike trigged a sell-off in banking stocks.  All big four lenders - Westpac Banking Corporation (ASX:WBC), Commonwealth Bank of Australia (ASX:CBA), Australia and New Zealand Banking Group (ASX:ANZ) and National Australia Bank (ASX:NAB) – ended in th red. Westpac was the biggest loser among banking stocks after Morgan Stanley downgraded it to an equal-weight rating.

Among others, energy, tech and telecom sectors also ended in negative terrain.

Bucking the bearish trend, A-REIT emerged as top gainer by rising 1.2%. Consumer staples, consumer discretionary, utilities, and health care sectors also settled in green zone with modest gain.

Top gainers and losers

Top 5 ASX Gainers and Losers (Data Source: ASX Website, as of 4:30 PM AEST)

The biggest loser among the ASX pack was Australia’s largest independent coal miner Whitehaven Coal (ASX:WHC), which ended 9.5% lower. Some of the other top laggards were miner IGO (ASX: IGO), iron ore developer Champion Iron (ASX:CIA), insurance company Insurance Australia Group (ASX:IAG), and online retailer Redbubble (ASX:RBL).

On the gaining side, property business Goodman Group (ASX: GMG) was the best performer with a 5.6% gain. Some of other top gainers were real estate firm Charter Hall Group (ASX:CHC), software business Megaport (ASX:MP1), natural gas infrastructure business APA Group (ASX: APA), and international student placement services provider IDP Education (ASX:IEL).

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