Australian shares marginally extend losses after RBA cuts rate as expected

(Updates after RBA rate decision)

Feb 18 (Reuters) – Australian shares slightly deepened losses after the local central bank delivered its highly anticipated interest rate cut for the first time in over four years on Tuesday, driven by a sell-off in heavyweight financials.

The S&P/ASX 200 index, which was trading 0.4% lower ahead of the Reserve Bank of Australia’s decision, first cut losses to 0.3% but later dragged to fall about 0.7%. It was last trading down 0.5%.

The RBA cut rates by 25 basis points to 4.10%, easing its monetary policy for the first time since November 2020, saying progress had been made on inflation though it remained cautious around economic outlook.

Investors sold off rate-sensitive banks’ shares, which have gained over the four-year period when borrowing costs were not eased. Financials dropped about 1%.

Commonwealth Bank of Australia dropped 1%, while the other three major lenders fell between 0.8% and 2.3%.

Following the RBA decision, all the “Big Four” banks lowered their home loan rates by 0.25%.

“Sectors like the financials have come under pressure as rate cuts weigh on earnings growth potential for our big banks especially in a time where net interest margins have peaked, which is where the banks make a vast amount of profits,” said Grady Wulff, market analyst at Bell Direct.

Miners dropped 0.4% as the world’s largest-listed miner BHP slipped after posting a 23% drop in interim profit to $5.08 billion, its lowest since 2019, and flagging growth risks over potential U.S.-China trade tensions.

Rival Rio Tinto, which will report results later this week, shed 0.3%, further dragging the sector.

In New Zealand, the benchmark S&P/NZX 50 index fell 0.4% to 13,016.88. The Reserve Bank of New Zealand is expected to cut interest rates further, with a 50 bps reduction on Wednesday. (Reporting by Adwitiya Srivastava in Bengaluru; Editing by Rashmi Aich and Sumana Nandy)