Australian shares dropped on Wednesday, weighed down by significant losses in the mining and energy sectors due to a decline in commodity prices. The S&P/ASX 200 index fell 0.31% to 7,805.40 points at 2:17 PM AEST, after closing 0.9% higher on Tuesday. Meanwhile, New Zealand shares remained flat, with investors awaiting the central bank's policy decision.
Global Market Reactions to Federal Reserve Testimony
Globally, market participants focused on Federal Reserve Chair Jerome Powell's testimony before Congress, seeking insight into the central bank's monetary policy. Powell noted that U.S. inflation has been improving but remains above the 2% target. This week, critical U.S. inflation data is expected, including the consumer price index on Thursday and the producer price index on Friday.
Domestic Concerns Over Inflation and Rate Hikes
In Australia, a recent survey revealed a dip in consumer sentiment in July, driven by concerns over persistent inflation and potential further rate hikes. These domestic economic worries have added to the pressure on the Australian stock market.
Financial Sector Sees Broad Declines
The financials sub-index lost 0.4%, with the "Big Four" banks experiencing declines between 0.1% and 0.8%. This sector's performance reflects broader concerns about economic stability and the impact of potential interest rate changes.
Mining Stocks Hit Lowest Level Since Early July
Bellwether mining stocks dropped 0.9%, reaching their lowest level since July 3. The sub-index, which tracks global iron ore prices, was affected by reduced demand from China, the world's largest iron ore consumer. Major mining companies like BHP Group (ASX: ASX:BHP) fell 0.9%, while Rio Tinto's (ASX: ASX:RIO) stock remained largely flat.
Energy Sector Impacted by Falling Oil Prices
Energy stocks also declined by 0.5%, influenced by a drop in oil prices. Notable players such as Woodside Energy (ASX: WDS) and Santos (ASX: STO) saw their shares fall by 0.5% and 0.6%, respectively. The energy sector's performance is closely tied to global oil market dynamics, which have been volatile.
Healthcare and Technology Sectors Also Decline
The healthcare sector fell 0.5%, and information technology firms lost 0.7%, contributing to the overall market decline. These sectors, often seen as defensive, also faced selling pressure amid broader market concerns.
New Zealand Market Steady Ahead of Central Bank Decision
Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index remained largely unchanged at 11,829.38. Investors were cautious ahead of the Reserve Bank of New Zealand's cash rate decision, which is expected to remain unchanged according to a Reuters poll.