Australia shares kick off 2026 higher as banks lead gains

Updates to close

By Jasmeen Ara Islam Shaikh

Jan 2 (Reuters) - Australian shares snapped a four-day losing streak on Friday, as investors returned to bellwether financials and lifted the index to a one-week closing high, while a selloff in miners capped gains in a thin session.

The S&P/ASX 200 .AXJO rose 0.2% to 8,727.8 points, its highest close since December 24. Turnover was about 40% of the 30-day average, with few traders returning to markets after the New Year holiday.

The benchmark gained 6.8% in 2025, marking a third straight annual advance but lagging major global peers such as Japan's Nikkei .N225 and Hong Kong's Hang Seng .HIS.

Financials .AXFJ added 0.4% on the day, marking their steepest rise in over a week. The 'Big Four' banks rose between 0.4% and 0.8%.

When uncertainty eases, even slightly, money tends to flow first into the big banks, said Greg Boland, market strategy consultant at Moomoo Securities Australia.

"They benefit from stabilising rate expectations, resilient balance sheets, and the fact that investors see them as reliable dividend engines in a world still negotiating what 'normal' really looks like."

With a hawkish pivot to the Reserve Bank of Australia's outlook on interest rates in late 2025, markets are anticipating a higher-for-longer rate environment to prevail, generally a boon for banks but with a touch of lingering credit-risk.

Investors now look forward to inflation data due January 7 and labour data later this month to better assess the central bank's course of action at the February policy meeting.

Gold miners .AXMM fell 1.5% weighed down by Northern Star Resources NST.AX as the mining giant downgraded its annual production forecast making it the top laggard on the benchmark. The broader mining gauge .AXMM, which constitutes gold miners, ended flat.

Meanwhile, Nickel Industries NIC.AX surged to a one-year high after Sphere Corp 347700.KQ took a 10% stake in its Indonesia project.

New Zealand markets were closed for a public holiday. The country's S&P/NZX 50 index .NZ50 rose 3.3% in 2025, marking its third straight annual gain.

(Reporting by Jasmeen Ara Shaikh in Bengaluru; Editing by Mrigank Dhaniwala)

((Jasmeenaraislam.shaikh@thomsonreuters.com))

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