The local share market has finished slightly lower as traders digest weak economic data and the implications of higher rates for longer, following a shift in stance from Australia's central bank.
The benchmark S&P/ASX200 index rose as much as 0.4 per cent in the first 10 minutes of trade on Wednesday but faded throughout the day to close down 11.6 points, or 0.16 per cent, at 7,118.0
The broader All Ordinaries dropped 9.5 points, or 0.13 per cent, to 7,310.4.
Before markets opened, Reserve Bank of Australia governor Philip Lowe told a Morgan Stanley business summit that "some further tightening of monetary policy may be required" following Tuesday's rate hike, which surprised many commentators.
"Markets are now digesting a hawkish stance from the RBA that investors weren't anticipating this year, and the door is firmly propped open for more hikes," said eToro analyst Josh Gilbert.
"The biggest worry for investors is uncertainty."
Also on Wednesday morning, the Australian Bureau of Statistics reported that gross domestic product climbed 0.2 per cent in the March quarter, compared to expectations of a 0.3 per cent rise.
Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, called it a "slightly weaker" GDP readout that reflected the "twin headwinds of rising inflation and higher interest rates".
Royal Bank of Canada Sydney branch chief economist Su-Lin Ong said that beneath the headline data, the national accounts figures painted a "sombre and challenging picture," with labour costs rising while productivity in negative territory.
The readout will make for "very uncomfortable reading" for the Reserve Bank and there's a now a risk that the central bank will have to raise rates even higher than the peak rate of 4.35 per cent that the RBC is forecasting, Ms Ong wrote.
The ASX's energy sector was the biggest loser on Wednesday, dropping 0.7 per cent as oil prices dipped on a build up of inventory.
Woodside dropped 0.4 per cent, Santos fell 0.9 per cent and Beach plunged 8.1 per cent to a two-month low of $1.305 as Australia's third-largest oil and gas producer announced it was abandoning its Trigg 1 gas exploration well in WA's Perth Basin after poor test results.
Also, Viva Energy fell 2.8 per cent to $3.11 after a contractor's crane failed at its Geelong Refinery in Victoria, dropping that compressor was being installed as part of a major maintenance program at one of Australia's two remaining oil refineries.
The accident means the refinery will likely be unable to produce premium petrol or diesel until September, with the Shell-branded fuel station owner expecting to incur $25 million to $35 million a month in lost earnings over that time.
The Big Four banks were mostly lower, with Westpac dropping 1.5 per cent to $20.03, NAB retreating 1.8 per cent to $25.30 and CBA down 0.9 per cent to $95.69.
ANZ was the outlier, basically flat at $22.73.
In the heavyweight mining sector, BHP had edged 0.1 per cent higher at $43.62 and Rio Tinto gained 0.3 per cent to $111.63, while Fortescue fell 1.0 per cent to $20.16.
Realestate.com.au owner REA Group dropped 1.5 per cent and Domain Holdings fell 0.9 per cent as the higher rates weighed on the prospects of the residential property market.
Developer Stockland closed down 1.6 per cent, Lendlease retreated 2.0 per cent and Charter Hall Group fell 1.5 per cent.
PolyNovo soared up 15.8 per cent to a six-week high of $1.685 as the biotech company, which makes a "dermal scaffold" that aids in the treatment of wounds and burns, reported its first-ever $A7m sales month.
"There is a lot to like about our growth, but particularly our rate of growth," said chair David Williams.
The Australian dollar was buying 66.71 US cents, from 66.65 US cents at Tuesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Wednesday down 11.6 points, or 0.16 per cent, at 7,118.0.
* The broader All Ordinaries fell 9.5 points, or 0.13 per cent, to 7,310.4.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.71 US cents, from 66.65 US cents at Monday's ASX close
* 93.01 Japanese yen, from 92.73 Japanese yen
* 62.45 Euro cents, from 62.23 Euro cents
* 53.77 British pence, from 53.60 British pence
* 109.99 NZ cents, from 109.45 NZ cents
