Australia Shares Post Sixth Straight Fall

   Ross Kelly 
 

SYDNEY--Australian stocks reversed early gains to end down 0.5% Tuesday in their sixth straight day of losses, as strong U.S. jobs data firm the case for interest-rate increases in the world's biggest economy.

Higher global interest rates could be bad for dividend plays because they make rival investment options such as bonds more attractive. Consequently, Australia's banking stocks have been sold off heavily in recent weeks. They ended mixed Tuesday despite the release of a bullish private-sector business-confidence survey and stronger-than-expected lending data. More broadly, uncertainty over Greek debt negotiations continues to weigh on global markets.

The S&P/ASX 200 index fell 27.2 points to 5471.3, reducing its gain for 2015 to 1%.

"The realignment of risk in global bond yields has translated to heightened volatility and a savage 15 %-20% correction in Australian banks," said Charlie Aitken, managing director of Bell Potter Wholesale. "With volatility, however, comes opportunity," Mr. Aitken said, estimating that falling bank stock prices have pushed up their dividend yields toward 6%. The current yield on a 10-year U.S. government bond is around 2.4%.

Commonwealth Bank of Australia (CBA.AU), the country's biggest lender, lost 0.6%, while National Australia Bank Ltd. (NAB.AU) lost 0.8%. Westpac Banking Corp. (WBC.AU) gained 0.5% and Australia & New Zealand Banking Group Ltd. (ANZ.AU) closed flat.

The number of home loans issued in April rose unexpectedly, by 1% from March, while business confidence strengthened in May, indicating rate cuts and a voter-friendly national budget are gaining traction, according to the National Australia Bank.

But banking stocks have also been knocked by fears record-low interest rates are creating a housing bubble. Investors will be taking cues from a speech due Wednesday by Reserve Bank of Australia Gov. Glenn Stevens about the state of the housing market.

Big mining stocks continued to struggle amid a cooling of a decadelong resources boom. BHP Billiton Ltd. (BHP.AU) and Rio Tinto Ltd. (RIO.AU) each fell 1.1%.

"There just isn't any strong catalysts for the Australian market," said Chris Weston, Melbourne-based strategist at IG. "Despite a strong business-confidence report, the market is facing a slowing Chinese economy, constant headlines about a housing bubble, a lack of rebalancing in the domestic economy and ultimately falling earnings estimates."

Australian television companies also suffered after Nine Entertainment Co. (NEC.AU) slipped out a profit warning late Friday ahead of the long Queen's Birthday weekend. Shares in the free-to-air broadcaster closed down 16%, while rival Seven West Media Ltd. (SWM.AU) shed 11% despite reaffirming its own earnings guidance.

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