Australian Index Tracker Drifts Lower Amid Resources and Financials Weakening

The Australian Shares Index ETF (ASX:VAS) has been following the local benchmark lower in recent sessions, with materials, energy, and banking weightings doing most of the damage. The fund's performance is a result of its passive nature, mirroring the weights of the decline in mining, energy, and banking counters. This was cushioned only marginally by a firmer healthcare bench.

The ASX 300 showed a wide spread of weakness across sub-sectors, with diversification offering limited shelter. The fund's unit price tracked its underlying basket closely, as is expected from a replication mandate.

The market's slide has now stretched across a full trading week and change, leaving the local board at its weakest level since mid-year. This leg of the decline is different from earlier wobbles due to the source of pressure - both Australian government and US long bond yields have pushed sharply higher, and firmer crude has revived inflation worries.

The sector weights did most of the work in the session's decline, with basic materials carrying the heaviest drag. Energy fell too, despite a rising crude price, which was seen as profit-taking after a strong run rather than any reassessment of the commodity itself. Financials added to the drag due to sensitivity to further Reserve Bank of Australia tightening.

Healthcare was the standout on the other side of the ledger, helped by a strong day from a listed radiopharmaceuticals name and firmness across pathology and device majors. Consumer staples and consumer discretionary counters also finished higher.