Banks, miners drag Australian shares down as Wall Street rally ends

Australian shares ended lower in broad-based declines on Thursday, with financial and mining stocks leading losses, after Wall Street broke a winning streak that was driven by expectations of US rate cuts next year.

The S&P/ASX 200 index closed 0.5 per cent lower at 7,504.1 points. The benchmark had climbed 0.7 per cent to hit a 10-month closing high on Wednesday.

US stocks closed lower overnight after an abrupt mid-afternoon nosedive, with all major indices ending over 1 per cent lower.

"Despite this drop, the optimism is still there – markets aggressively pricing in for three Fed cuts in 2024," said Glenn Yin, head of research and analysis at AETOS Capital Group.

Last week, the Federal Reserve signalled it had reached the end of its tightening cycle and opened the door to rate cuts in 2024.

Investors now await the release of US data on core Personal Consumption Expenditure (PCE) on Friday for more clues on rate-cut timings.

"I think it is healthy to see some pullback in both US and Aussie equities, provided the Red Sea developments are temporary and do not lead to a regional conflict," Yin added.

In Sydney, the financial sub-index led the fall, shedding 0.4 per cent. National Australia Bank and Commonwealth Bank of Australia ended 0.2 per cent and 0.4 per cent lower, respectively.

Heavyweight miners dropped 0.5 per cent, with BHP Group dropping 0.1 per cent.

Battery mineral producer Liontown Resources emerged as the top loser on the benchmark index, falling as much as 9 per cent on a legal challenge regarding a royalty deed applied to its tenements at the Kathleen Valley lithium project.

Energy stocks dropped 0.6 per cent as oil prices fell over low demand concerns.

Gold stocks fell 0.8 per cent and tech stocks retreated 1.4 per cent.

In New Zealand, the benchmark S&P/NZX 50 index rose 0.4 per cent to 11,627.99 points.