MELBOURNE,Australia--Broad selling dragged Australian shares to a two-week low Tuesday even as the local currency surged against the U.S. dollar on the hawkish tone from the Reserve Bank of Australia.
In the sharpest decline since the end of June, the S&P/ASX 200 lost 68.1 points, or 1.2%, to settle near the session lows at 5687.4.
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The four largest banks weighed heavily, collectively knocking almost 24 points off the ASX 200 on reports the industry regulator is near to releasing its plans for capital targets.
Energy stocks were also under heavy pressure despite a slight recovery in oil prices in Asian trading, after recent gains in crude were pared overnight as investors continue to weigh signs of strong demand against the global supply glut.
Only the property sector managed modest gains.
Trading was a little more active than on Monday, with 2.34 billion shares traded worth 6.02 billion Australian dollars (US$4.70 billion), Commonwealth Securities said.
The Australian dollar climbed to its highest in two years, extending gains after the central bank released the minutes of its last policy meeting, surprising many with an upbeat view of the economy and a discussion about where interest rate might eventually be raised to.
Commonwealth Bank of Australia led the major banks lower, falling 1.9%, while National Australia Bank lost 1.8%. Westpac Banking shed 1.7% and Australia & New Zealand Banking declined 1.6%. The regional banks were also lower, with Bendigo & Adelaide Bank 2% lower and Bank of Queensland 1.7% weaker.
Concerns the Australian Prudential Regulatory Authority will ratchet up capital requirements for the big banks when it unveils awaited proposals has weighed on sentiment over recent weeks, after the regulator suggested it wouldn't wait for the Basel Committee on Banking Supervision to finalize international measures. Capital requirements are widely expected to rise, but the question for the banks will be the scale of any increases and how long they will have to adopt the changes.
Among energy stocks, Woodside Petroleum and Santos fell 2.3% and 1%, respectively, and Oil Search lost 0.7% after it stuck to its 2017 production guidance despite a drop in second-quarter production due to maintenance at its oil operations and the PNG LNG gas-export project in Papua New Guinea.
Rio Tinto outpaced the fall in the wider materials sector, losing 1.5% after its scaled back guidance for full-year iron-ore shipments and hard-coking-coal production. BHP Billiton, which is due to report annual production figures early Wednesday, slipped 0.3% and iron-ore producer Fortescue Metals Group edged down 0.2%.
Construction and engineering contractor Cimic picked up 1.1% for the day following the release of its first-half results.
In the property space, Scentre Group gained 1.7% and Vicinity Centres added 0.8%.
Ric Spooner, chief market analyst at CMC Markets in Sydney, said investors are seeking value in the real estate sector after declines recent weeks. "While concerns remain about the medium-term outlook for residential property, the overall sector is attracting support as investors focus on a lower-for-longer scenario for interest rates," he said.
-James Glynn in Sydney contributed to this article.
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(END) Dow Jones Newswires
July 18, 2017 03:23 ET (07:23 GMT)