By Rushil Dutta
Nov 15 (Reuters) - Australian shares fell for the second day on Tuesday as expectations of higher U.S. inflation and faster-than-expected Federal Reserve rate increases under Donald Trump's presidency hurt equities.
Traders said that with local bond yields rising in tandem with those in the United States, defensive stocks came under pressure.
The S&P/ASX 200 index .AXJO was down 0.5 percent, or 28.03 points, at 5317.8 at 0100 GMT. The benchmark fell 0.5 percent in the previous session.
The healthcare sector was the worst performer on the index, with its biggest stocks CSL Ltd CSL.AX and Ramsay Health Care RHC.AX losing 1.1 percent and 2.1 percent, respectively.
Utilities, considered defensive stocks alongside healthcare and consumer staples, also lost heavily. Electricity generator and retailer AGL Energy AGL.AX slumped as much as 1.5 percent before recovering a bit to be 0.4 percent lower.
"You can put it down to the change at the moment in the bond market," said Evan Lucas, a market strategist at IG markets, referring to rising local bond yields.
"Therefore, those seen as bond-like securities are under most amount of pressure."
A strong U.S. dollar, driven by the surge in Treasury yields, has also knocked commodities priced in dollars.
The dollar .DXY hit an 11-month peak against a basket of currencies and has remained well bid since Trump's shock win in the U.S. Presidential election last week. Markets expect Trump's policies will usher in higher U.S. spending, growth and inflation, sending Treasury bond yields skyrocketing. MKTS/GLOB
With the commodities and resources under pressure from a stronger dollar, Australia's big miners BHP Billiton (LON:BLT) BHP.AX , Rio Tinto (LON:RIO) RIO.AX , and Fortescue Metals FMG.AX sold off, falling between 0.8 percent and 1 percent. FRX/
The energy index .AXEJ bounced from the previous session's losses, eking out minor gains, as oil prices rebounded from three-month lows on rekindled hopes for an OPEC production cut. O/R
The financial index .AXFJ remained under pressure on subdued outlook for the 'Big Four' banks, which continued to underperform. Westpac Banking Corp WBC.AX and Australia and New Zealand Banking Group ANZ.AX , which traded ex-dividend on Monday, lost about 1 percent each.
New Zealand's main index was .NZ50 was 0.2 percent, or 14.4 points, higher at 6,752.19, after gaining 0.6 percent in the previous session.
A devastating earthquake that struck the South Island on midnight on Sunday and killed at least two people was expected to cost the nation's treasury a few billions of dollars.
Post-quake rebuilding is expected to prove stimulatory, although markets were mainly driven by recent rate cuts and data showing a solid economy.
Losses in financials were offset by gains in utilities and healthcare stocks.
While Westpac Banking Corp WBC.NZ and Australia and New Zealand Banking Group ANZ.NZ lost 1.2 percent and 1.7 percent respectively, retirement villages operator Summerset Group SUM.NZ and electricity producer Contact Energy CEN.NZ were among the biggest gainers on the main index.
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