The New Zealand stock market experienced volatile trading on Wednesday as investors digested the Reserve Bank of New Zealand's expected rate cut alongside signals that the monetary easing cycle might be concluding.
Central Bank Moves and Market Reaction
The S&P/NZX 50 index was trading 0.9% higher at 13,606.68 points as of 0200 GMT, having pared gains after initially surging as much as 2% to reach a record high earlier in the session. The market movement followed the RBNZ's decision to reduce its benchmark official cash rate by 25 basis points to 2.25%.
While the rate cut was widely anticipated, policymakers indicated that this might mark the end of the current easing cycle as economic indicators show signs of improvement. This prompted traders to significantly scale back their expectations for additional rate cuts in the near future.
Australian Inflation Surprises Markets
Across the Tasman Sea, Australia released inflation data that exceeded market expectations. The monthly Consumer Price Index (CPI) for October showed a 3.8% year-on-year increase, surpassing the median forecast of 3.6% among economists.
This stronger-than-expected inflation reading reinforced the growing consensus that the Reserve Bank of Australia's policy easing cycle may have reached its conclusion. The S&P/ASX 200 responded positively, climbing 0.8% to 8,607.1 points.
Sector Performance and Market Dynamics
Rate-sensitive financial stocks in Australia gained 0.6%, with three of the "big four" banks recording increases between 0.2% and 0.7%. Westpac was the exception among major banks, declining 0.3% amid ongoing pressure on what some analysts consider frothy valuations in the banking sector.
The mining sector extended its gains for the third consecutive session, rising 1% as iron ore prices firmed on Tuesday. The price strength followed proposals to reduce China's port fees, which market participants believe could curb long-term stockpiling behavior.
Leading mining companies demonstrated strong performance, with BHP, Rio Tinto, and Fortescue rising between 0.5% and 1.7%. Real estate stocks also advanced, gaining 0.7% with property landlord Goodman Group jumping 1.8%.
Other sectors showing strength included healthcare, which rose 1.8%, and consumer staples, which increased by 1%. The broad-based gains across multiple sectors indicated positive market sentiment despite the central bank signaling a potential shift in monetary policy direction.
