August 23, 2018 / 6:43 AM / 3 months ago

Australia shares finish lower under political cloud; NZ slips

* Aussie parliament adjourned; PM’s position appears untenable

* Financials drag Aussie benchmark lower

* Airlines Qantas, Air NZ fall on respective bourses (Updates to close)

Aug 23 (Reuters) - Australian shares fell on Thursday, as uncertainty over who the country’s next prime minister would be rattled investor confidence, with losses in financials capping gains in resources stocks.

Prime Minister Malcolm Turnbull’s tenure looked doomed on Thursday as some senior ministers resigned and supported a second leadership ballot.

Turnbull said he would hold a leadership vote on Friday, which would be the second in a week, only if he received a letter signed by a majority of Liberal party legislators.

Parliament was adjourned on Thursday to allow for a party meeting, with Turnbull saying the leadership crisis was an “internal insurgency” to move the party to the far right.

The Aussie dollar was trading more than 0.8 percent lower against the U.S. dollar during the day.

“We are seeing elevated sovereign risk in our country, I think it looks like the Prime Minister is going to get knocked off any minute now, so there is definitely sovereign risk here compared with emerging markets,” said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.

Financials were a major factor in the benchmark S&P ASX 200 index losing 0.3 percent to end Thursday at 6,244.40, but the materials and energy sectors were bulwarks against a steeper fall. The benchmark lost 0.3 percent on Wednesday.

Financial stocks gave up 1.2 percent, with largest lender Commonwealth Bank of Australia down 1.6 percent, and Australia and New Zealand Banking Group Ltd falling 1.7 percent.

Blue Ocean Equities’ Somasundaram said money parked in Australian financials was being redeployed as trade war fears eased somewhat, sending funds to growth-oriented investments.

Qantas Airways finished down 2.8 percent, despite reporting a record annual profit, as it flagged a rise of about A$690 million in its fiscal 2019 fuel bill.

Somasundaram said Qantas had benefited from hedging its fuel costs in the oil market, “but now that is all unwinding”.

Australian energy stocks rose 0.8 percent, after oil prices slipped but maintained much of the 3 percent rise recorded on Wednesday after a larger-than-expected draw in crude inventories and as U.S. sanctions on Iran signalled tightening supply.

The sector index’s move was helped by gains in stocks such as Santos Ltd, up 11.3 percent, which reported a near-doubling of underlying profit in the first half and revived its dividend.

Santos agreed on Wednesday to buy privately held Quadrant Energy for at least $2.15 billion, grabbing what may be the biggest oil find off Western Australia in more than 20 years.

Among materials stocks, global miner BHP and peer Rio Tinto Ltd were 1.3 percent and 0.4 percent higher, respectively.

Across the Tasman Sea, Air New Zealand ended down 4.3 percent as it flagged higher fuel costs as a weight on fiscal 2019 earnings, much like Qantas.

Air New Zealand weighed on the local benchmark S&P/NZX 50 index which ended 0.2 percent lower at 9,139.87 on Thursday. It rose 0.5 percent on Wednesday. (Reporting by Aaron Saldanha in Bengaluru Editing by Eric Meijer)

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