Australian Stocks End Higher, Narrowing May's Decline

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Australian stocks Wednesday ended modestly higher for a second straight session as investors continued to pick up beaten-down bank shares.

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That took some of the sting out of what was still the sharpest monthly fall for the market since January 2016. Financial stocks weighed heavily after earnings highlighted continuing margin headwinds and the federal government introduced a surprise tax on the biggest banks' liabilities to raise money to help plug its budget deficit.

Recovering from an initial dip into negative territory, the S&P/ASX 200 gained 6.7 points, or 0.1%, Wednesday to finish at 5724.6.

For the month, the index dropped 3.4% after gains in the preceding three months.

For the session, 2.2 billion shares were traded with a higher-than-usual value of 9.3 billion Australian dollars (US$6.9 billion), Commonwealth Securities said.

The major banks rose for a second consecutive day as bargain hunters stepped in but still ended May sharply weaker.

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The lenders had surged about 25% after the U.S. election amid hopes a Trump presidency would spur growth and inflation in the world's biggest economy. However, concerns about stock valuations emerged after a lackluster earnings season, with rising household debt and booming property prices in Melbourne and Sydney also weighing on market sentiment. Selling was exacerbated by the levy on liabilities, which Canberra expects will raise up to A$1.6 billion a year.

Commonwealth Bank of Australia, the country's largest bank and biggest mortgage lender, added 0.3% on Wednesday but was 8.9% lower for the month. Australia & New Zealand Banking was hardest hit in May, losing almost 15% even after picking up 0.4% Wednesday.

The extent of any recovery in bank stocks could be limited over coming weeks as investors await the release of the prudential regulator's revised position on bank mortgage-risk weightings and capital requirements, said Ric Spooner, chief market analyst at CMC Markets in Sydney.

The energy sector held back the broader market for the day as oil futures extended losses in Asian trading on concerns the global market is set to remain oversupplied. Mining stocks also weakened after Chinese iron-ore futures fell as trading resumed after a four-day holiday.

Woodside Petroleum slipped 0.3%, Oil Search fell 0.6% and Santos lost 1.8%. Diversified miners BHP Billiton and Rio Tinto were 0.4% and 0.7% lower, respectively, and South32 was down 2.6%.

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

(END) Dow Jones Newswires

May 31, 2017 04:04 ET (08:04 GMT)