ASX slips into third weekly loss as Reserve Bank comments weigh on the market

Good news on oil could not save the ASX from its third straight week of losses after recent comments on possible rate hikes from the RBA governor spooked markets.

The benchmark ASX 200 gave up a positive morning trading session to trade virtually flat - down just 1.20 points or 0.01 per cent to 8731.20.

The broader All Ordinaries added 12 points or 0.13 per cent to close at 8922.90.

Potential rate hikes helped lift the Australia dollar, which was buying 71.27 US cents.

On an overall flat day of trading, just three of the 11 sectors finished higher with gains out of the material sector offset by falls in bourse heavy banks.

The diversified miners rallied with BHP up 1.40 per cent to $61.05 and Rio Tinto added 0.84 per cent to $167.49.

Gold producers outperformed on Friday, as Northern Star Resources jumped 2.40 per cent to $22.21, Evolution Mining surged 4.42 per cent to $13.70 and Newmont Corporation rallied 2.48 per cent to $175.87.

While the mining sector rallied, the index heavy big four banks all fell, with Commonwealth Bank down 1.03 per cent to $152.43, National Australia Bank slumped 1.91 per cent to $38.47, Westpac slipped 0.23 per cent to $34.75 and ANZ stumbled 0.26 per cent to $37.68.

Shares reversed course during the afternoon’s session after Reserve Bank of Australia governor Michele Bullock told the House of Representatives economics they were weighing up if rates needed to go higher to get inflation down in a reasonable time frame.

Following her comments, money markets jumped to a 95 per cent chance of another interest rate hike after the RBA meets on September 28 to 29.

Should the RBA lift interest rates for a fourth time this would take the cash rate from 3.60 to 4.60 per cent it will be the highest point since November 2011.

AMP deputy chief economist Diana Mousina said higher interest rates in Australia hit the sharemarket this week.

“Australian shares are flat this week and are 4 per cent lower over the month and have had no growth since the beginning of the year which reflects a more aggressive RBA (relative to the Fed) and a slowing economy,” she said.

Betashares chief economist David Bassanese said interest rates in Australia would likely follow the US Federal Reserve – who lifted rates overnight on Wednesday – due to facing the same inflation issues.