Australian shares rebound from 3-week lows on mining boost; Pull the banks

Australian shares rebounded on Wednesday from three-week lows hit in the previous session lifted by iron ore and gold miners, although gains were capped by financial stocks as sticky core inflation readings kept the possibility of a rate hike alive.

The S&P/ASX 200 ended up 0.2% at 8,695.60. The benchmark fell 0.5% on Tuesday, marking its weakest session in three weeks.

Domestic data earlier in the day showed that consumer prices fell more than forecast in November. However, the closely watched core gauge remained above the central bank’s 2%-3% target range, indicating continued inflationary pressures and leaving room for a potential interest rate hike.

Focus now turns to the quarterly measure, expected later this month, which will impact the Reserve Bank of Australia’s first monetary policy meeting of the year in mid-February.

Swaps indicate a 35% chance of a quarter-point rate hike next month, up from about a 30% chance before the inflation data.

“Prior market prices of further cuts in 2026 are being corrected outside the curve, and a hold or even modest increase is now more likely than fresh cuts in the near term,” said Greg Boland, market strategy consultant at Moomoo Australia.

Financials fell 1% to a four-week low. Three of the “Big Four” banks fell between ⁠1.5% and ⁠2%, while top lender CBA fell 1.7% to its lowest point in nearly four weeks.

In contrast, miners rose 1.2% to a record high on stronger commodity prices.

Shares in BHP added 1% to close at a two-year high, while Rio Tinto rose 1.6% to set a record for the third consecutive session.

Lynas Rare Earths, the world’s largest rare-earth producer outside China, rose 14.5% after China banned exports of certain rare-earth elements to Japan.

New Zealand’s S&P/NZX 50 rose 0.4% to close at a record high of 13,715.02.