Australian shares reversed early losses on Wednesday after a softer-than-expected inflation report tempered bets for interest rate hikes, while New Zealand stocks rose even as the central bank came close to lifting rates.
The S&P/ASX 200 index finished 0.7% higher at 8,717.70, after declining as much as 0.4% earlier in the session.
Data showed that consumer prices in Australia rose by less than expected in April due to a tax cut on fuel, while core inflation ticked up as higher oil prices fed through to the broader economy.
The latest data likely gives the Reserve Bank of Australia room to hold rates in June while reassessing in August, though the limited easing in core inflation means further hikes remain a possibility, said Cameron Curko, CIO at Pitcher Partners.
Swaps imply a near possibility of the central bank holding on to its cash rate of 4.35% in June, with odds of a hike in August easing to 33.7% from 45% before the data.
Financials ended up 0.1%, recovering from a 1.9% fall in early trade. The "big four" banks recouped most losses from early trade, with Commonwealth Bank of Australia closing in positive territory.
Rate-sensitive real estate and consumer discretionary stocks ended up 1.6% and 1.8%, respectively.
While the prospect of delayed hikes is being well-received by these rate-sensitive names given the disproportionate negative impact on these sectors, banks are a "more complicated story," Curko said.
Miners notched their highest close in nearly two weeks. Diversified miner South32 rose 3.5% to its highest close since early February as aluminium prices hovered near four-year peaks.
Among individual stocks, Endeavour hit an all-time low after the pub operator unveiled plans to sell its wineries and vineyards and cut its dividend payout.
New Zealand's benchmark S&P/NZX 50 index closed up 1.2% at 13,227.81. The Reserve Bank of New Zealand warned interest rates will need to rise sooner and by more than expected to counter an energy shock, while holding its rate steady in a split vote.
