Australian shares end lower as central bank holds rates steady

(Updates to close)

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RBA keeps rates steady, signals unlikely cuts unless growth falters

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Financials and energy stocks drag ASX 200

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Miners rise on strong iron ore prices, Star jumps on loan waiver

By Roushni Nair and Jasmeen Ara Islam Shaikh

Sept 30 (Reuters) - Australian shares settled lower on Tuesday as financials and energy stocks dragged after the central bank kept interest rates steady as expected and struck a cautious tone on policy, curbing risk appetite and clouding near-term easing bets.

The S&P/ASX 200 index slipped 0.2% to 8,848.8 points, after rising as much as 0.3% to a four-week high earlier in the session.

The benchmark snapped a five-month winning streak, falling 1.4% in September, its worst month since March.

The Reserve Bank of Australia left the key rate at 3.6%, and signaled further cuts are unlikely unless growth falters, even as earlier rate cuts this year have spurred spending and housing demand. Policymakers warned inflation may prove more persistent than expected, prompting many forecasters to push back expectations for the next cut to mid-2026.

Shane Oliver, head of investment strategy and chief economist at AMP, expects the benchmark to move sideways in the final quarter, with a risk of correction, as the RBA’s cautious tone keeps investors wary despite typical year-end strength.

Banks fell 0.5%, with Commonwealth Bank down 0.9% to lead losses among the Big Four lenders. The sub-index is off 1.5% this month after a 3% gain in August.

Analysts have long flagged CBA’s premium valuation as a risk, but the stock has defied repeated “sell” calls, supported by its dominant market position and strong capital returns, said Philip Pepe, senior equities analyst at Shaw and Partners.

Tuesday’s drop likely reflects profit-taking rather than a fundamental shift, he added.

Energy shares slid 1.6% to their lowest in a week, as oil prices eased. Beach Energy and Karoon Energy each fell more than 3%.

Miners rose 1% to their highest since January, buoyed by strength in iron ore prices.

Star Entertainment jumped as much as 4.5% after securing a loan covenant waiver to avoid breaching financial agreements.

New Zealand’s S&P/NZX 50 index climbed 1.2% to 13,292.4, its highest since October 2021.

(Reporting by Roushni Nair and Jasmeen Ara Islam Shaikh in Bengaluru; Editing by Mrigank Dhaniwala)