• The ASX finished marginally lower before the Australia Day break
  • Aussie inflation came in at 7.8%, higher than predicted
  • Gold stocks fell broad based

 

The ASX dropped 0.10% on Wednesday as Australia’s inflation rate shot to a 33-year high in the last quarter to 7.8% YoY, or 1.9% QoQ.

The headline figure, which was 7.3% in the previous quarter, came in better than the RBA predicted at 8%, but higher than the economists’ consensus of 7.5%.

Price rises were broad-based, but food and energy were the main drivers.

Dylan Zhang, ASX Equities Analyst at Stake, said today’s CPI figures will not come as welcome news for investors, who have enjoyed a new year rally based on cooling sentiment around inflation.

Zhang said we can expect rate hikes to continue or even increase as a result.

“It’s likely we’ll see a 25bps hike at the next RBA meeting, but a 50bps hike is not unthinkable.”

Zhang says most equity sectors are likely to stay negative, but it’s likely that recent gains for tech stocks will backtrack the most.

“With a bear market looking more sustained, volatility is almost guaranteed,” Zhang said.

“However, commodity and energy sectors may benefit from China’s economy restarting. Companies like BHP and Rio Tinto could also benefit from the recent appreciation in the Aussie dollar as their exports become more valuable.”

Treasurer Jim Chalmers gave some hope, telling reporters that inflation might have already peaked.

“This is very high … unacceptably high. This is likely the peak in inflation, but we won’t know that for sure,” Chalmers said.

Over the pond, NZ inflation was also at a three-decade high at 7.2%, bolstering the case for a rate hike by the RBNZ.

The currency market moved after the report, with the Aussie dollar touching a 5-month high of US70.99.

Aussie government bond yields also surged, with the 3-year bond yield rising by 8bp as traders put bets on rate hikes.

Back to the ASX, Financials and Utilities paced the bourse higher, while Energy and Tech dragged.

Gold stocks were sold off as gold prices remain elevated but were wavering in the last few sessions.

Spot gold is currently trading at US$1,931.90 based on thin trading in Asia as most traders are still on a lunar new year break.

Looking ahead to tonight’s session on Wall Street, expect to see a host of releases in the US, including:

US GDP, durable goods orders, trade balance, wholesale inventories and new home sales.

 

BIG CAP WINNERS

Swipe or scroll to reveal the full table. Click headings to sort.

WordPress Tables Plugin

Accent Group (ASX:AX1) rose 11% after reporting that total sales in the 27 weeks ended 1 January were $825m, up 39% on pcp. EBIT for the half is expected to be in a range of $90 million to $92 million.

 

BIG CAP LOSERS

Swipe or scroll to reveal the full table. Click headings to sort.

WordPress Tables Plugin

Gold miners like West African Resources (ASX:WAF),and Evolution Mining (ASX:EVN) lost their shine today, down 6-7%.

Featured Companies

You might be interested in