• S&P ASX 200 records biggest daily gain since mid-April as investors react to CPI data
  • Australia’s headline inflation rate in May down to 5.6% from 6.8% in April, better than forecast
  • Investors react positive to news Ramsay Healthcare is looking to sell its Asia JV

 

The Australian share market has recorded its biggest daily gain since mid-April after lower than forecasted CPI and a rebound in US stocks overnight.

The S&P ASX 200 closed up 1.10% to finish on 7196.50 points. Ten of the 11 sectors were in the green today with consumer discretionary up 2.14% to lead the winners list, followed by real estate up 2.05% and financials adding 1.42%.

Bucking the trend of rising sectors was utilities which closed just in the red, down 0.01%.

But there was really just one figure Australian financial markets were interested in today with the Australian Bureau of Statistics (ABS) releasing its much anticipated CPI data for May at 11.30am (AEST).

Headline inflation rate in May was 5.6% from 6.8% in April – the lowest annual pace since April 2022 – with investors reacting optimistically that the Reserve Bank of Australia (RBA) will hit the pause button when it meets next Tuesday rather than raise the official rate again.

“While prices have kept rising for most goods and services, many increases were smaller than we have seen in recent months,” ABS head of prices statistics Michelle Marquard said.

Lower fuel prices, along with holiday travel and accommodation costs helped ease inflation.

However, it wasn’t all good news when putting the latest CPI figures under the microscope.

“It can be helpful to exclude items with volatile price changes from the headline CPI indicator to provide a view of underlying inflation,” Marquard said.

“When excluding these volatile items, the decline in inflation is more modest.

“The annual increase for the monthly CPI indicator was 6.4% in May, slightly lower than the rise of 6.5% recorded in April and down from a peak of 7.3% in December 2022.”

 

US stocks rebound

On Wall Street overnight all three indexes gained after consumer-confidence for June hit a 17-month high, signalling a more resilient US economy than expected.

The Conference Board’s index has risen to 109.7 in June from 102.5 in May. New home sales rose 12.2% month-on-month in May, while manufactured durable goods orders rose by 1.7% in May from April.

“It’s very strong data across the board,” National Australia Bank’s Skye Masters said on the bank’s The Morning Call podcast.

“What you are seeing in the consumer confidence measure and US housing data is not really what you’d be expecting to see at this point of the tightening cycle.

“Normally these data points are heading lower rather than higher.”

The S&P CoreLogic Case-Shiller National Home Price Index was only one data point to lower, falling 0.2% in April, the first annual decline since April 2012 as higher mortgage costs made home purchases more expensive.

On US markets big name tech stocks like Microsoft, Apple and Nvidia drove the NASDAQ 1.7% higher overnight like they have for much of 2023. Shares in Apple closed at a record high overnight, with the stock close to the  US$3 trillion market capitalisation.

The S&P 500 rose 1.1% while the Dow lifted 0.6%.

Tonight markets will be on tender hooks as US Fed boss Jerome Powell is scheduled to address a European Central Bank Forum in Portugal.

 

Mixed Asian markets

In Asia today markets were mixed with positive sentiment from Australia’s falling CPI spilling over.  Japan led the gainers.  At 4.10pm (AEST) the Nikkei 225 was up by 1.90%, while the Topix rose 1.87%.

Hong Kong’s Hang Seng index was down 0.006%. In mainland China the Shanghai Composite was up 0.076%, while the Shenzhen Composite fell o.36%.

In South Korea the Kospi fell 0.68% and the Kosdaq was 0.76% lower.

On Friday purchasing managers’ index in China will be released with expectations it will show a sustained decline in the country’s manufacturing along with services sector.

 

BIG CAP WINNERS

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On the winners list today is Ramsay Health Care (ASX:RHC) after announcing that together with its partner Sime Darby Berhad, a decision has been made to explore selling its 50:50 joint venture in Asia, Ramsay Sime Darby Health Care (RSD).

“The decision has been reached following the receipt of significant inbound interest in RSD at values that are in shareholders’ interests to explore, noting that there is no certainty that a sale process will result in a completed transaction,” RHC said in an announcement.

RHC said RSD has continued to perform strongly in FY23.

“The equity accounted contribution from the business for the 9 months to 31st March 2023 was $16.2m, an increase of 31.7% on the prior corresponding period.”

 

BIG CAP LOSERS

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Bega Cheese (ASX:BGA) remains on the losers list today, continuing to lose ground after yesterday announcing its earnings would be at the lower end of its earlier guidance for FY23 and it would impair assets.

BGA which owns the Dairy Farmers, Big M, Yoplait Farmers Union milk brands along with Vegemite, also announced the sale and Port Melbourne site to Charter Hall for $114.6 million (excluding GST), which it will lease back.

The company also flagged further property asset sales an impairment of between $180m and $280m on its bulk segment.

BGA said a decline in Aussie milk production had intensified farm gate competition, creating an impact to its bottom line profit.

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