Australian shares fall after rate decision

SYDNEY (MarketWatch) -- Australian shares ended with mild losses today after the Reserve Bank of Australia surprised markets factoring in easier policy by keeping its key cash rate on hold at 4.25%.

The S&P/ASX 200 index AU:XJO �ended the session down 0.5% at 4,274.20, erasing earlier gains. The Australian dollar traded at $1.0790.

The move for the share market pared gains made Monday when the index jumped 1.1% to end the session at a closing level not seen since early December.

Stocks were pressured Tuesday after the Australian central bank kept its cash rate on hold for another month while saying that, with growth expected to be close to trend and inflation close to target, policy settings were currently appropriate.

The RBA cut rates in quick succession at the end of last year in an attempt to help soothe markets unsettled by Europe�s ongoing debt woes and said today that the inflation outlook means that it has scope to ease policy again if necessary.

�A very clear easing bias is in place,� noted Michael Blythe, economist at the Commonwealth Bank. However, �a clearer threat to an otherwise favorable economic backdrop needs to emerge before the RBA acts on that bias,� he said.

Banks were among the worst performers by sector after the rate decision, with Commonwealth Bank of Australia AU:CBA � CBAUF �down 0.7% and Westpac Banking Corp. AU:WBC �WEBNF �down 0.5%.

�Financials took a hit following the no-change decision,� noted Ben Taylor, strategist at CMC Markets. Taylor said that the RBA�s call means that overall lending demand is likely to remain subdued.

Click to Play Stocks end lower as Greece weighs on markets

Stocks ended slightly lower, putting on hold five weeks of gains for the broader market, as investors shifted their focus to wrangling in Greece over fiscal austerity.

Macquarie Group Ltd. AU:MQG �MQBKY �and National Australia Bank Ltd. AU:NAB �NAUBF �were already under pressure before the decision, having updated investors earlier in the day.

Macquarie shares ended the day down 0.8% after the firm said that it�s fiscal-year profit would fall by 25% compared to the year-ago period but that it was also looking to buy back shares.

The investment banking group blamed difficult macroeconomic conditions for its capital markets and securities business for the expected result.

On the retail side of the banking sector, National Australia Bank shares dropped 4%.

The lender stated that its first-quarter cash earnings increased to 1.4 billion Australian dollars ($1.5 billion), from A$1.3 billion in the year-ago period.

Trading conditions were challenging, the bank said, while adding that it intends to review its U.K. banking operations given the difficult conditions facing the businesses.

Growth-sensitive miners were also notably lower after the decision, with Rio Tinto Ltd. AU:RIO �RIO �down 1.8% and Newcrest Mining Ltd. AU:NCM �NCMGF �down 1.1%.

BHP Billiton Ltd. AU:BHP �BHP �shares were down. 0.8% ahead of the mining giant�s results.

Retailers also came under some selling pressure with upmarket department store operator David Jones Ltd. AU:DJS �down 2% and rival Myer Holdings Ltd. AU:MYR �losing 1.9%.

Markets also remain wary over developments in Europe, with US stocks retreating from multi-year highs overnight as Greece�s political leaders struggled to reach agreement on spending cuts.

Greece has yet to reach a deal that will satisfy its institutional lenders, and talks are set to continue tonight.

�Uncertainty still hovers but it feels like markets have absorbed the worst of the concerns about Europe,� said Jamie Spiteri at Shaw Stockbroking.