Australia Stocks Fall to Seven-Week Low

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--A broad sell-off led by another drop in the banks dragged Australian shares to their lowest finish in seven weeks Wednesday.

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Equities across the region faltered as concerns continue to build over the ability of the White House to make progress on economic policy. Local sentiment was further dampened by weak wage data, which casts doubt on forecasts included in the federal government's budget of last week.

Ending near its weakest levels of the day, the S&P/ASX 200 lost 64.5 points, or 1.1%, to close at 5786.0. It was the sharpest one-day drop since March 22.

While stocks fell, the local currency firmed against the U.S. dollar as investors weigh the latest in a series of controversies to hit the Trump administration, adding to worries that the president's agenda will be derailed.

Meanwhile, data on the day showed wage growth remained at record-low levels in the first quarter, adding to concerns around high levels of underemployment in the economy. S&P Global Ratings affirmed Australia's AAA sovereign credit rating but warned a downgrade was possible if progress toward achieving budget surpluses slowed.

Moody's Investors Service weighed in on the four biggest banks, warning that measures introduced in Canberra's budget could further pressure earnings growth already set to moderate due to low interest rates and competition.

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The five largest banks collectively knocked almost 29 points off the ASX 200. The banks have been under pressure for several weeks, following lackluster earnings reports and then a surprise tax on liabilities proposed in the budget.

Commonwealth Bank of Australia lost 2%, Westpac Banking was 2.3% weaker, Australia & New Zealand Banking lost 1.3% and National Australia Bank was 2.1% lower. Investment bank and asset manager Macquarie dropped by 1.3%.

Energy stocks also weakened, as crude oil retreated amid concerns that U.S. production was undercutting efforts by major producing nations to curtail output. Woodside Petroleum slipped 0.2%, Oil Search fell 0.3% and Santos declined 2.5%.

The materials sector bucked the trend as miners were buoyed by a rally in Chinese iron-ore futures.

Diversified miners BHP Billiton and Rio Tinto rose 0.2% and 2.2%, respectively, and Fortescue Metals Group gained 4.2%. The three are among the world's largest producers of iron ore.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

May 17, 2017 04:23 ET (08:23 GMT)