The share market has closed lower as investors pulled out of bank stocks in anticipation of a rise in interest interest rates in the United States.
Investors are speculating the US Federal Reserve will raise interest rates sooner rather than later, and consequently reducing their holdings in high-yielding stocks such as the banks and Telstra, CMC Markets chief market strategist Michael McCarthy said.
“That’s been the major swing factor on the day – the lack of support for yield-related stocks,” he said.
In low interest rate environments, yield is a dominating concern for investors.
As interest rates rise to more normal levels, yield becomes less important as an investment selection tool.
Mr McCarthy said many local investors held too high a proportion of dividend-yielding stocks, so that was one of the main areas of action for them at the moment.
Australian investors generally held a lower proportion of resources stocks, he said, and there was some evidence of rotation from the banking sector into resources on Tuesday.
Chinese iron ore prices also rebounded from five-year lows overnight to push back above $US85 a tonne.
BHP Billiton rose 10 cents to $35.74, Rio Tinto improved 15 cents to $61.81 and Fortescue Metals firmed four cents to $4.00.
Among the major banks, Commonwealth Bank weakened 73 cents to $78.19, National Australia Bank reversed 16 cents to $33.64, Westpac dumped 27 cents to $33.50 and ANZ shed 25 cents to $32.12.
Telstra dropped six cents to $5.43.
The release of the minutes from the Reserve Bank of Australia’s latest meeting had little impact on the local market, despite the central bank appearing more concerned about recent rises in the housing market.
KEY FACTS
* At 1627 AEST the benchmark S&P/ASX200 index was down 28.1 points, or 0.51 per cent, at 5,445.4 points.
* The broader All Ordinaries index was down 29.2 points, or 0.53 per cent, at 5,446.2 points.
* The September share price index futures contract was 32 points lower at 5,441 points, with 151,677 contracts traded.
* National turnover was 1.64 billion securities worth $4.4 billion.
