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Australian shares recorded modest gains last week, with financials driving the positive momentum, though the S&P/ASX 200 ended a three-week winning streak with a weekly decline of 0.8%.Investors remain cautious amid expectations for possible rate hikes in 2026 after inflation remained persistently high and the Reserve Bank of Australia adopted a hawkish stance. Banking stocks and consumer discretionary sectors showed resilience, while miners faced pressure. Market participants are closely watching the RBA's upcoming meeting minutes and early January inflation data to gauge future monetary policy and its impact on sectors.
Australian shares posted modest gains last week, with most sectors finishing higher and financial stocks leading the performance. The S&P/ASX 200 index closed 0.5% higher at 8,628.20 on Friday. Despite the daily gain, the benchmark ended the week down 0.8%, halting a three-week streak of increases. Advertisement
The index has yet to fully recover from a 3% fall in November, with investors focusing on the potential trajectory of rate hikes in 2026. Persistent inflation and the Reserve Bank of Australia's (RBA) recent hawkish stance have kept markets attentive. Currently, the probability of a rate hike is priced at 25% for February, 45% for March, and 75% for May, with the cash rate standing at 3.6%.
Shane Oliver, chief economist and head of investment strategy at AMP, said that shares, after rebounding from November lows, have faced renewed pressure over the last two weeks, describing the weakness as corrective. Market attention now turns to the RBA's December meeting minutes and upcoming monthly inflation data, expected early in January, as these will provide clearer insight into policy direction.
Financials advanced 1.1%, led by the big four banks, all of which ended the week in positive territory. The sub-sector's performance in 2026 is being closely watched, as high valuations and modest earnings growth have limited gains, with a projected 7% yearly increase compared to last year's 28.2% surge. Rate-sensitive consumer discretionary and real estate stocks added 0.8% and 0.4%, respectively, reflecting investor confidence in these areas.
Miners were an outlier, posting a 0.6% weekly decline. BHP and Fortescue fell 1.2% and 3.2%, respectively, snapping three weeks of gains. The sector's performance highlights ongoing volatility, influenced by global commodity prices and market sentiment.
In New Zealand, the S&P/NZX 50 index closed 0.6% higher at 13,333.40. Despite the daily rise, the benchmark posted a 0.6% fall for the week, marking the third consecutive week of losses and underlining investor caution in the region.
Source Reuters
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