Crude Oil Dip Boosts Australian Banks and REITs
The Australian stock market extended its winning streak with a third consecutive gain, driven by a 1.9% drop in crude oil prices. This decline eased inflation concerns, boosting banks and real estate stocks. The S&P/ASX 200 index rose 0.6% to 8,735.70, with most sectors showing positive movement.
Lower oil prices can reduce gasoline and transport costs, shifting market perceptions of inflation. Reuters attributed the pullback in oil to steady Middle East exports and a G7 release from emergency stockpiles, which alleviated supply fears. This matters for Australia because inflation expectations influence investor views on the Reserve Bank of Australia's (RBA) next moves. Interest-rate swaps now suggest a 23% chance of a rate hike in November, after the cash rate was raised to 4.60% last week.
Rate-sensitive sectors responded positively: financials gained 0.7%, with the Big Four banks up between 0.6% and 0.8%. Real estate stocks jumped 1.1%, led by Scentre Group and GPT Group, which climbed 2.7% and 2.3%, respectively. Meanwhile, tech stocks fell nearly 3%.
The drop in oil prices and reduced odds of a November rate hike provided some relief for banks and real estate investment trusts (REITs). However, with the cash rate already at 4.60%, any rallies in these sectors may be limited unless markets become confident that this is the peak.