Australia shares shed 0.2 pct as RBA's shift stings, earnings in focus

Tue Feb 4, 2014 8:15pm EST

(Adds analysis, quotes, stocks on the move)

SYDNEY Feb 5 (Reuters) - Australian shares fell 0.2 percent in choppy trade on Wednesday morning, as some investors struggled to come to terms with the Reserve Bank of Australia's (RBA) decision to drop its easing bias.

A bounce on Wall Street helped the market recoup part of the losses though the sting from Tuesday's RBA policy shift lent a cautious air to trading.

Australia's central bank kept its main cash rate at a record low of 2.5 percent on Tuesday as widely expected, but it surprised some traders by dropping its long-held easing bias on rates.

"The RBA dropping its easing bias is probably one of the reasons," said Chris Kimber, managing director at Kimber Capital, identifying reasons around the market falling.

"The RBA looks to be on hold until the end of the year."

Bluechip resources and banks dragged the market lower. Commonwealth Bank of Australia slipped 0.1 percent while Australia and New Zealand Banking Group fell 0.3 percent to 5-1/2 month lows as the Federal Court ruled the bank was wrong to charge its customers additional fees for late loan payments.

Rio Tinto Ltd slipped 0.1 percent and BHP Billiton Ltd lost 0.8 percent to its lowest point since mid-October as investors weighed near-term supply tightness against tepid U.S. and Chinese factory data and an emerging markets selloff.

The S&P/ASX 200 index lost 12.5 points to 5,084.6 by 0109 GMT, hovering at 6-week lows. The benchmark tumbled 1.8 percent in the last session in the biggest daily drop in six months.

Elsewhere a handful of stocks among the defensive sector fell, with consumer retail staple Wesfarmers Ltd dropping 1.5 percent while bio-tech firm CSL Ltd lost 1.4 percent.

"We're moving into the start of our reporting season, often times there's been anticipation about what those results are going to be, so there's volatility there," said Tony Russell, senior equities adviser at RBS Morgans.

The benchmark is hovering some 50 points above a 4-month low of 5,028.2 hit on Dec. 12, a low marked on worries about slowing growth in China and the U.S. Federal Reserve's tapering of its massive stimulus program.

U.S. stocks rebounded overnight, buoyed by encouraging earnings, as the market attempted to steady in the wake of its largest selloff in months a day earlier.

Britain's Virgin Atlantic Airways will halt operations between Sydney and Hong Kong from May 5 because the route is no longer profitable, the company said. Shares in Virgin Australia Holdings lost 1.5 percent to trade at 2-year lows of A$0.33.

Antares Energy Ltd tumbled 19 percent to 7-month lows of A$0.415 after the company said it will continue its funding of its Northern Star development.

New Zealand's benchmark NZX 50 index edged 0.1 percent higher to 4,806.5.

(Reporting by Thuy Ong; Editing by Shri Navaratnam)