Australian shares rose on Friday, buoyed by a rally in financial stocks, but ended the week slightly lower as mining stocks suffered sharp declines. Concerns over the effectiveness of China’s $1.40 trillion stimulus package, along with global geopolitical uncertainties, weighed heavily on market sentiment.
The benchmark S&P/ASX 200 index climbed 0.7% to close at 8,279.2 points on Friday, driven by gains in the banking sector. However, it recorded a 0.2% weekly loss, reflecting the significant drag from the resource-heavy mining sector.
Miners Weigh on the Market
Mining stocks suffered their worst week since June 2022, collectively falling 7.1%. Industry giants BHP Group, Rio Tinto, and Fortescue Metals Group saw weekly declines of 7.6% to 9.5%, largely due to a steep drop in iron ore prices.
Skepticism about the impact of China’s massive stimulus package fueled the decline. The plan, announced over the weekend, includes infrastructure investments and property market support. However, doubts linger about its ability to stimulate sustainable growth.
“Despite the size of the stimulus, doubts about execution and timing have left markets unconvinced,” noted a report from leading brokerage Jarden.
The situation worsened due to a downturn in Chinese demand for Australian commodities, compounded by uncertainty surrounding U.S.-China relations following Donald Trump’s re-election.
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Financials Buck the Trend
The financial sector provided a rare bright spot, gaining 1.4% on Friday and 2% for the week. Persistent inflation concerns have tempered expectations of near-term interest rate cuts by the Reserve Bank of Australia (RBA).
“Slowing wages and falling selling prices signal some easing, but weak productivity and sticky inflation remain key hurdles for the RBA,” analysts at UBS noted. UBS continues to forecast a modest 25-basis-point rate cut in May 2024, depending on inflation trends.
Major banks, including Commonwealth Bank, Westpac, and National Australia Bank, posted strong gains, reflecting investor confidence in the sector despite broader market volatility.
Energy and Healthcare Under Pressure
Energy stocks fell 2.1% for the week, weighed down by OPEC’s revised demand outlook and a strengthening U.S. dollar. Key players Woodside Energy and Santos declined 0.2% and 0.9%, respectively.
The healthcare sector also faced challenges following U.S. President Donald Trump’s controversial appointment of vaccine skeptic Robert F. Kennedy Jr. to lead the country’s health agency. This decision raised concerns about the regulatory environment and its implications for global health policies.
Outlook and Risks
Sector performance divergence highlights broader global economic uncertainties. While Australia’s financial sector stands to benefit from steady inflationary trends and strong fundamentals, the resource-reliant economy remains highly exposed to external shocks, particularly from China.
“Chinese growth is the key swing factor for Australia,” Jarden added. “Tariffs from the U.S. may be manageable, but escalating trade tensions and weakening Chinese demand pose significant risks to Australia’s economic outlook.”
New Zealand Market Steady
Across the Tasman Sea, New Zealand’s benchmark S&P/NZX 50 index ended the week flat, reflecting subdued market activity.
