June 4, 2019 / 2:13 AM / 3 months ago

Australia shares eke out gains, banks weaken ahead of likely RBA rate cut

* Mining units gain most on ASX

* Rate cut pressure on bank margins raise doubt on dividend payouts - analyst

* NZ’s Fletcher Building slumps after FY outlook cut

By Devika Syamnath

June 4 (Reuters) - Australian shares moved higher on Tuesday, with mining stocks gaining in force, ahead of a central bank meeting where the cash rate is expected to be cut for the first time in almost three years.

Australia’s S&P/ASX 200 index was 0.1%, or 6.2 points, higher at 6,327.1 by 0155 GMT. The benchmark lost 1.2% on Monday. The Reserve Bank of Australia (RBA) is expected to cut its policy rate by reducing the cash rate to a record low 1.25%, as the central bank looks to revive growth and inflation.

“My fear is that markets will continue to drift because if the RBA does cut rates, the concern is what next....When you’re cutting rates and you’re already at 1.25%, it does not leave you a lot of wriggle room,” said Nick Twidale, chief operating officer at Rakuten Securities Australia.

Banking stocks traded within a tight range after media reported that Australia’s treasurer has told the heads of the country’s big four banks that the government wants them to pass on in full any cash rate cut by the central bank.

“If there’s any margin contraction there then, although they (“Big Four” banks) are generous dividend payers historically, there will be some questions on their ability to continue to pay big dividends and that could be a concern,” said Twidale.

Commonwealth Bank of Australia and National Australia Bank Ltd traded 0.3% and 0.4% lower at 0147 GMT.

Mining stocks in Australia’s key resource space were up as much as 1.7%, after having lost 3.5% over the previous four sessions when geopolitical risks, principally over the escalating Sino-U.S. trade war, had raised doubts about growth and weighed on global risk sentiment.

Mining majors Rio Tinto and BHP Group gained as much as 2.1% and 2.4%, respectively.

Among other resource units, oil and gas firm Santos Ltd also gained up to 1.7%.

Gold stocks continued to enjoy bullion’s safe haven status, pushing into a third straight session of gains and advancing as much as 1.8% to an over 7-year high.

Miners of the precious metal such as Newcrest Mining Ltd and Evolution Mining Ltd climbed up to 2% and 4.2%, respectively. Evolution hit a record high.

In other sector news, shares of Australian mine developer Clean Teq surged as much as 20% after it said it has started looking for partners for its nickel, cobalt and scandium project in central New South Wales, amid a boom in demand for battery metals.

Meanwhile, New Zealand’s benchmark S&P/NZX 50 index fell 1.7% to 9,946.79.

New Zealand’s largest builder Fletcher Building Ltd fell as much as 4.6% after it cuts its full-year earnings outlook. (Reporting by Devika Syamnath in Bengaluru; Editing by Simon Cameron-Moore)

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