Australian shares trade flat as fresh interest rate fears spark tech sell-off

Fresh fears of interest rate rises hit the Australian sharemarket on Monday, as traders made a “defensive rotation” away from the rate sensitive sectors.

The benchmark eked out a tiny 0.70 point or 0.01 per cent gain to 8731.90, while the broader All Ordinaries slipped just 3.60 points or 0.04 per cent to 8919.10.

Australia’s dollar firmed against the greenback to buy 71.26 US cents.

Five sectors finished in the green while six traded lower - with gains out of the healthcare and financials offset by falls in technology shares.

Bourse heavyweight Commonwealth Bank firmed 0.37 per cent to $152.99, while National Australia Bank added 0.65 per cent to $38.72, Westpac finished 0.52 per cent higher to $34.93 and ANZ outperformed up 0.93 per cent to $38.03.

Vaccines giant CSL continued its recent run higher up another 1.54 per cent to $178.30, while Fisher Paykel Healthcare jumped 1.51 per cent to $35.74 and Cochlear soared 5.27 per cent to $140.95.

Offsetting gains from the financials and healthcare sector was a slump in technology stocks, as accounting software provider Xero dropped 4.30 per cent to $60.08, while WiseTech Global fell 0.90 per cent to $31.77 and NextDC gave back 3.35 per cent to $10.98.

Hitting the Australian market on Monday was fears of further interest rate hikes, with money markets fully pricing in another interest rate hike when the Reserve Bank meets on September 28 to 29.

On Friday, Reserve Bank of Australia governor Michele Bullock warned the upside risks to inflation had “materialised” with Westpac and Commonwealth Bank changing their rate forecasts to a hike after these comments.

Should the money market prediction come true, it will be the fourth interest rate hike this year, as the central bank continues to fight inflation.

Global X ETF strategy analyst Joseph Marassa said raiders were making a “defensive rotation” due to higher for longer interest rates and fears of persistent inflation.

“Following last week’s hawkish RBA testimony, the move continues the pattern seen through the month, with the health care sector offsetting weakness across rate sensitive sectors,” he said.

“The domestic market continues to contend with a restrictive monetary policy environment.

“Following three RBA rate hikes this year, uncertainty around the path of rates remains a headwind for both consumers and equity investors.”