Robb M. Stewart

MELBOURNE, Australia--Australian shares faltered Thursday in the wake of weak capital investment numbers and a further slide in the price of iron ore, one of the country's key exports.

The S&P/ASX 200 finished the day 0.5% lower at 5411.4, continuing to drift away from Monday's over five-year closing high. That pares the rise in the benchmark index to 4.3% for the month to date.

Losses were widespread, led by mining heavyweights and industrial shares. Qantas Airways' shares were particularly hard hit after it reported it swung to a first-half loss, casting a shadow over what had until now been regarded by analysts as a strong earnings season for Australian companies.

"Aussie equities struggled to recover from the 15-point drop following a disappointing capex read, which set the somber tone amongst investors for the remainder of the trading day," said Betty Lam, a sales trader at CMC Markets in Sydney.

Figures from the government's statistics agency showed companies had scaled back investment in the final quarter of last year, driven by a decline in mining investment. Mining intentions were also weak, with early estimates for the fiscal year pointing to a large fall as mining spending continues to fall and only a modest rise is expected in other sectors.

"These numbers do present a significant downside risk to Australia's growth outlook over the coming 18 months or so," said Paul Bloxham, chief economist at HSBC in a research report. "While we expect growth to continue to rebalance, it will be a challenge to absorb the decline in mining investment that is expected."

He said he still believes the central bank is done cutting rates.

Adding to the subdued outlook for the mining industry, the industry benchmark price for iron ore slipped to an eight-month low. That weighed on the shares of some of the world's biggest producers of the raw material, with BHP Billiton falling 0.5%, Rio Tinto dropped 0.6% and Fortescue Metals down 3.2%.

As the latest earnings season winds down, Qantas turned in a half-year loss of 252 million Australian dollars and detailed plans to cut 5,000 jobs, sell leases on airport terminals, defer the delivery of aircraft and cool expansion of its Jetstar brand.

"The losses across Qantas domestic and Qantas international were heavier than expected, but the real disappointment comes from Jetstar and this is likely to be seen in the most negative light," said Stan Shamu, a market strategist at IG in Melbourne. He said Qantas shares, which fell 9.1% Thursday, are likely to remain under pressure in the near term "with uncertainty being the key theme."

Traders said the market's focus coming into Friday will be on the details of an eagerly anticipated testimony to the U.S. Senate by Federal Reserve Chairwoman Janet Yellen and whether recent economic indicators have altered her outlook.

Write to Robb M. Stewart at robb.stewart@wsj.com

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