Australia Stocks Drop as Banks, Energy Firms Falter

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Australian shares snapped two straight sessions of gains Tuesday as banks and energy companies led broad selling, sending the stock market down to a more than one-week low.

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Sentiment in the financial sector soured after the federal government passed a new tax on the largest lenders' liabilities and Moody's Investors Service downgraded its credit rating on a clutch of banks, including the big four lenders.

Energy stocks also faced heavy selling as crude-oil prices held steady near seven-month lows in Asian trading amid investor skepticism over efforts by the world's biggest producers to curb the global supply glut.

Finishing at its lows for the day, the S&P/ASX 200 dropped 47.9 points, or 0.8%, to 5757.3. That wiped out gains over the past two sessions.

The four big banks collectively knocked almost 16 points off the index as they pulled back from a recovery over the past week.

Moody's lowered its ratings on the banks by one notch to Aa3, citing elevated risks among households from rising real-estate indebtedness.

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Analysts said the move isn't likely to increase the big banks' borrowing costs, since Moody's action brought it in line with other big ratings firms, though it came as a tax on big banks' liabilities was passed by parliament to help shrink the budget deficit.

Westpac Banking lost 1.9%, Australia & New Zealand Banking fell 1.3%, National Australia Bank shed 1.1% and Commonwealth Bank of Australia was 0.7% lower. Investment bank and asset manager Macquarie, which will also be squeezed by the new tax, was 0.8% weaker.

Among energy stocks, Woodside Petroleum was down 1.3%, Oil Search lost 1.5% and Santos declined 2%.

Oil-and-gas producer AWE, however, rose 1.1% to extend Monday's rally after the company said investment firm Dawney & Co. was offering to pick up call options from shareholders that could secure it just under 20% of AWE's shares. AWE recommended its shareholders ignore the proposal, which Dawney said was intended to position it as an intermediary between shareholders and any potential bidder for the company.

Tatts Group gained 3.6% and Tabcorp Holdings rose 0.4% after the Australian Competition Tribunal said it planned to approve their tie-up.

For the session, 2.17 billion shares valued at 6.05 billion Australian dollars (US$4.60 billion) were traded, Commonwealth Securities said.

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

(END) Dow Jones Newswires

June 20, 2017 03:36 ET (07:36 GMT)