Rate hike worries weigh on Australian shares; rare-earth miners stumble

(Updates for market close) Banks slip on rate hike concerns Rare earths miners pressured by potential U.S. policy changes Mining sub-index gains led by BHP, Rio Tinto By Keshav SinghChundawat Jan 29 (Reuters) - Australian shares ended Thursday modestly lower, dragged by rate-sensitive financial stocks, while rare-earth miners also came under pressure after reports that U.S. President Donald Trump could scrap a price floor underpinning the industry. The S&P/ASX 200 (.AXJO) ended 6.4 pips lower at 8,927.50 points. It had ended 0.1% lower on Wednesday. Data on Wednesday showed that core inflation surprised on the high side last quarter, pushing swaps to price in a near 70% chance of a rate hike, when the Reserve Bank of Australia (RBA) meets next month. (0#AUDIRPR) “This expectation of tighter monetary conditions has effectively weighed down sentiment on the ASX today,” said Tim Waterer, chief market analyst at KCM Trade. Financial stocks (.AXFJ) slumped 0.3% with Commonwealth Bank of Australia (CBA.AX) and Westpac (WBC.AX) falling 1.1% and 1%, respectively. The sector could find support ahead, as the prospect of higher net interest margins following any official RBA rate increase may help lenders perform relatively well over time, added Waterer. Real estate stocks (.AXRE) followed suit, dropping 0.2% over concerns that a rise in interest rates could dull property demand. Real estate companies Charter Hall Group (CHC.AX) and Harvey Norman (HVN.AX) slid 2% and 0.9%, respectively. Rare earth miners came under pressure after Reuters reported that the Trump administration may scale back plans to guarantee minimum prices for U.S. critical minerals projects. Rare-earth producers Lynas Rare Earth (LYC.AX) and Iluka Resources (ILU.AX) sank 3.7% and 14.1%, respectively. Iluka separately flagged a non-cash impairment charge of around A$350 million ($248.08 million) before tax for its mineral sands business, to be recognised in its final 2025 results. The mining sub-index (.AXMM) rose 1%, led by advances in BHP (BHP.AX) and Rio Tinto (RIO.AX) , cushioning losses elsewhere in the sector, including among rare-earth producers. Energy stocks (.AXEJ) gained 0.9%, tracking a rise in oil prices. (O/R) The New Zealand benchmark S&P/NZX 50 index (.NZ50) fell 0.5% to 13,348.61 points. ($1 = 1.4108 Australian dollars)