Australia Markets closed

Banks drag as ASX gives up early gains

Aditya Soni

Australian shares have given up their early gains as weak banking stocks offset strong advances in materials and energy stocks on the back of higher commodities and oil prices.

The S&P/ASX 200 index was down 0.2 per cent or 10.9 points to 6,275.2 by 1200 AEST on Tuesday.

The benchmark had added 0.2 per cent on Monday, posting a third day of gains.

While a lift in global stocks was helping local sentiment, technical trading offered opportunities at present, said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

"So, 6,308/18 might be enough for the moment. A break and close above, however, would suggest a run to 6,370/75," he said in a note.

A recovery in Chinese iron ore futures and a rally in London copper prices bolstered materials stocks, the dominant gainers on the benchmark.

The metals and mining index strengthened 1.1 per cent to a more than three-week high.

Anglo-Australian miner BHP jumped 1.5 per cent to a near two-month high and accounted for most of the gains on the benchmark, while rival Rio Tinto traded 0.6 per cent higher.

BHP, which has significant oil exposure due to shale assets in the United States, also cheered a rise in oil prices.

Oil prices gained on Monday, with US crude ending a choppy session higher on expectations a Canadian production outage will last until September, while global benchmark Brent gained on looming sanctions on Iran and falling output in Libya.

Higher oil prices also renewed buying interest in local energy stocks, with the energy index climbing 1.2 per cent to a more than three and a half year high.

Woodside Petroleum Ltd firmed 1.1 per cent to its highest since January 2015, while Origin Energy Ltd jumped 2 per cent to a three-year high.

Financials accounted for most of the losses and were on track to snap three sessions of sharp gains.

Top lender Commonwealth Bank of Australia dropped 1.4 per cent and was the biggest drag, while ANZ dipped about 1 per cent.

The Australian dollar was worth 74.73 US cents, edging up from 74.60 on Monday.