Australian shares ended higher on Wednesday, driven largely by gold stocks as bullion prices rose on an extended decline in the U.S. dollar and Treasury yields, while weaker-than-expected domestic inflation also aided risk sentiment. The S&P/ASX 200 index ended 0.25% higher at 7032.70 points. The benchmark closed 0.4% higher on Tuesday.
Australian gold miners gained nearly 5% to scale their highest levels in more than four months. Miners tracked bullion prices higher as traders assessed bets that the U.S. Federal Reserve would cut rates by the first half next year. Top gold miners Northern Star Resources and Evolution Mining rose 4.4% and 5.4%, respectively.
Arbitrage trading in gold - selling gold from the West to the East - at a time of surging gold prices is exceptionally good for Australia and its equity market, said Brad Smoling, managing director at Smoling Stockbroking. Meanwhile, data showed inflation eased by more than expected in October, suggesting the Reserve Bank of Australia (RBA) may not need to hike interest rates at its next meeting on Dec. 5.
"Today's data reduces the risk of an upside surprise to the fourth-quarter inflation relative to the RBA's inflation forecasts," analysts at country's top lender Commonwealth Bank of Australia wrote. Analysts widely expect the RBA to hold its cash rate at the current 12-year high level of 4.35%. Among other sectors, healthcare stocks added 1.8%, while energy and banking lost 0.8% and 0.4%, respectively. Across the Tasman Sea, the New Zealand benchmark S&P/NZX 50 index edged lower to close at 11,235.94 points.
The Reserve Bank of New Zealand (RBNZ) held its official cash rate steady, but warned inflation remained too high and that further policy tightening might be needed if price pressures did not ease. The RBNZ also raised its forecast peak cash rate to 5.7%, further heightening concerns of a rate hike. (Reporting by Aaditya Govind Rao in Bengaluru; Editing by Sherry Jacob-Phillips)