Asia report: Markets fall in quiet trading as RBA hikes rates

5th May 2026 11:47

(Sharecast News) - Asia-Pacific markets were mostly lower on Tuesday, with Japan, mainland China and South Korea closed for holidays, while investors assessed corporate earnings in Hong Kong and another interest rate rise from the Reserve Bank of Australia.

"Risk is coming off the highs as the market is forced to reprice the inflationary tail of the US-Iran shock," said Patrick Munnelly, market strategy partner at TickMill.

"Asia was softer despite thin holiday liquidity, with the MSCI Asia Pacific [down] 0.5% after Wall Street faded from record levels as Brent surged above $115 per barrel."

Japan was closed for the Children's Day holiday, mainland Chinese markets remained shut for the five-day Labour Day break, and South Korean markets were also closed for Children's Day.

Stock markets in the red in holiday-thinned trading

Hong Kong's Hang Seng Index fell 0.76% to 25,898.61, led lower by HSBC Holdings, which dropped 5.16% after posting a surprise fall in quarterly earnings.

HSBC said first-quarter revenue rose 6% to $18.6bn, ahead of forecasts, with net interest income up 8% to $8.9bn and wealth fees rising 18% to $2.7bn.

However, pre-tax profit slipped to $9.4bn from $9.5bn a year earlier, missing expectations for about $9.6bn, after higher expected credit losses and other impairment charges.

HSBC said expected credit losses rose by $400m to $1.3bn, including a loss linked to a British fraud case and a $300m increase in allowances to reflect "heightened uncertainty and a deterioration in the forward economic outlook due to the onset of the conflict in the Middle East".

The bank also pointed to wider geopolitical tensions and higher trade tariffs.

Elsewhere, Li Ning Co fell 4.13% and ANTA Sports Products lost 3.93%.

Australia's S&P/ASX 200 declined 0.19% to 8,680.50 after the Reserve Bank of Australia raised its key interest rate for a third consecutive meeting.

Codan fell 9.38%, Magellan Financial Group lost 6.87%, and Guzman Y Gomez dropped 6.34%.

"The RBA delivered the cleanest hawkish signal, hiking 25 basis points to 4.35% in an 8-1 vote, its third consecutive increase, while retaining a tightening bias despite forecasts showing weaker growth and higher unemployment," Munnelly said.

"[Governor Michele] Bullock described policy as now somewhat restrictive, but the board is clearly focused on preventing the Iran-driven energy shock from generating second-round effects from an already elevated Australian inflation starting point."

The RBA's nine-member policy committee voted eight to one to lift the cash rate to 4.35% from 4.1%, unwinding all of last year's cycle of monetary easing as it sought to contain persistent inflation.

Governor Bullock signalled policymakers would now pause to assess the next steps, saying the rate rises gave the central bank room to judge whether inflation expectations remain anchored.

"One reason to increase interest rates was to give ourselves space now to sit and see what happens," she said.

"We feel we're now in a position where we've got space, to be alert now to both sides of the risks to inflation - upside and downside."

Munnelly said that was "the key distinction" compared to other major central banks.

"Australia entered the shock with a visibly less comfortable inflation profile, so the RBA is choosing a more direct and credible response, with scope to unwind later if the profile improves," he noted.

"The trade-off is uncomfortable, but markets should reward the proactive stance - it supports the Australian dollar on dips, reinforces relative RBA hawkishness, and makes Australia one of the cleaner expressions of central banks willing to lean against embedded inflation risk rather than hope the shock fades."

Across the Tasman Sea, New Zealand's S&P/NZX 50 fell 0.47% to 13,035.70.

Westpac Banking Corporation declined 3.72%, Mainfreight lost 3.41%, and Freightways slipped 2.25%.

Dollar mostly higher as oil prices ease

In currencies, the dollar was last up 0.22% on the yen to trade at JPY 157.58, as it added 0.01% against the Aussie to AUD 1.3954, while it fell 0.26% on the Kiwi to change hands at NZD 1.6982.

Oil prices weakened, with Brent crude futures last down 1.27% on ICE at $112.99 per barrel, and the NYMEX quote for West Texas Intermediate falling 2.09% to $104.20.

"Crude has eased modestly in Asia ... helping US equity futures rise 0.2%, but that is only partial relief after Monday's near 6% spike," Munnelly said.

"The dollar is firmer across G10 as the Middle East safe-haven bid reasserts itself; gold has bounced back toward $4,550 per ounce, and USD-JPY is hovering just above 157, near the 100-day moving average after last week's intervention.

"The broader message is that equities can still lean on earnings momentum, but the oil-rates combination is again dictating the macro ceiling for risk."

Reporting by Josh White for Sharecast.com.