Australian shares declined on Tuesday as losses in banks and miners reflected a weakening investor sentiment around early U.S. interest rate cuts after stronger-than-expected retail sales data.

The benchmark index S&P/ASX 200 fell 1.8% to 7,612.50 points, its worst day since March 11.

A stronger-than-expected March retail sales data, along with other recent data from the United States, provided further evidence that the world's largest economy was doing well at the end of the first quarter.

Mathan Somasundaram, CEO at Deep Data Analytics, said the Reserve Bank of Australia has no hopes of cutting rates in May as it must wait for the Fed, adding that September looks the earliest but current trends suggest it will be even later.

"If the Middle East war escalates and energy prices pop, we may be talking about rate hikes in the second half of 2024 in the U.S.," he added.

Markets expect a 79.1% chance of the Fed holding interest rates in its June meeting, with a 72% chance of a first cut seen in September, according to the CME FedWatch Tool.

Banks fell 1.9% and were the top sectoral losers. The big four banks dropped between 1.7% and 2.3%.

Miners lost 2.2%. BHP Group, Rio Tinto and Fortescue declined between 1.8% and 2.9%.


Data from China, the largest importer of Australian iron ore, showed crude steel output fell 7.8% from last year in March as steelmakers cut production amid weaker demand and growing inventories.

Energy stocks fell 1.8% while technology stocks ended the day 1.3% lower, tracking their overseas peers.

Among other sectors, gold, healthcare and real estate lost between 1.4% and 1.9%.

Investors now await the release of data on labour force data and inflation for further cues on the Australian central bank's future monetary policy.

The New Zealand benchmark S&P/NZX 50 index fell 0.9% to 11,804.84 points. (Reporting by Roshan Thomas in Bengaluru; Editing by Varun H K)