Ross Kelly
SYDNEY--Australian stocks reversed early gains to end down 0.5%
Tuesday in their sixth straight day of losses, as strong U.S. jobs
data firm the case for interest-rate increases in the world's
biggest economy.
Higher global interest rates could be bad for dividend plays
because they make rival investment options such as bonds more
attractive. Consequently, Australia's banking stocks have been sold
off heavily in recent weeks. They ended mixed Tuesday despite the
release of a bullish private-sector business-confidence survey and
stronger-than-expected lending data. More broadly, uncertainty over
Greek debt negotiations continues to weigh on global markets.
The S&P/ASX 200 index fell 27.2 points to 5471.3, reducing
its gain for 2015 to 1%.
"The realignment of risk in global bond yields has translated to
heightened volatility and a savage 15 %-20% correction in
Australian banks," said Charlie Aitken, managing director of Bell
Potter Wholesale. "With volatility, however, comes opportunity,"
Mr. Aitken said, estimating that falling bank stock prices have
pushed up their dividend yields toward 6%. The current yield on a
10-year U.S. government bond is around 2.4%.
Commonwealth Bank of Australia (CBA.AU), the country's biggest
lender, lost 0.6%, while National Australia Bank Ltd. (NAB.AU) lost
0.8%. Westpac Banking Corp. (WBC.AU) gained 0.5% and Australia
& New Zealand Banking Group Ltd. (ANZ.AU) closed flat.
The number of home loans issued in April rose unexpectedly, by
1% from March, while business confidence strengthened in May,
indicating rate cuts and a voter-friendly national budget are
gaining traction, according to the National Australia Bank.
But banking stocks have also been knocked by fears record-low
interest rates are creating a housing bubble. Investors will be
taking cues from a speech due Wednesday by Reserve Bank of
Australia Gov. Glenn Stevens about the state of the housing
market.
Big mining stocks continued to struggle amid a cooling of a
decadelong resources boom. BHP Billiton Ltd. (BHP.AU) and Rio Tinto
Ltd. (RIO.AU) each fell 1.1%.
"There just isn't any strong catalysts for the Australian
market," said Chris Weston, Melbourne-based strategist at IG.
"Despite a strong business-confidence report, the market is facing
a slowing Chinese economy, constant headlines about a housing
bubble, a lack of rebalancing in the domestic economy and
ultimately falling earnings estimates."
Australian television companies also suffered after Nine
Entertainment Co. (NEC.AU) slipped out a profit warning late Friday
ahead of the long Queen's Birthday weekend. Shares in the
free-to-air broadcaster closed down 16%, while rival Seven West
Media Ltd. (SWM.AU) shed 11% despite reaffirming its own earnings
guidance.
Write to Ross Kelly at ross.kelly@wsj.com