The Australian sharemarket experienced a significant downturn after the latest data revealed an unexpected rise in inflation for the September quarter. This development has cast doubt on the possibility of an interest rate cut at the Reserve Bank of Australia’s upcoming meeting on Melbourne Cup Day.
As of 12:11 PM AEDT, the S&P/ASX 200 had fallen by 59.80 points, or 0.7%, to 8952.20, primarily driven by a decline in financial stocks. This drop follows a 0.5% loss on Tuesday. Meanwhile, the Australian dollar saw a modest increase of 0.3%, reaching US66.01¢.
Inflation Data Sparks Market Reaction
According to the Australian Bureau of Statistics, headline inflation, which measures the broadest range of prices in the economy, rose to 1.3% for the three months ending in September. This is a significant increase from the June quarter’s 0.7%, pushing the annual rate of price growth from 2.1% to 3.2%.
Trimmed mean inflation, a metric closely monitored by the Reserve Bank as it excludes extreme price changes, recorded a 1% rise for the quarter and a 3% increase over the year. This figure is at the upper end of the bank’s 2-3% target range.
“The Reserve Bank anticipated headline inflation to reach 3% by year-end, with trimmed mean inflation expected to decrease slightly from 2.7% to 2.6%,” stated the bank in its recent monetary policy report.
Banking Sector Takes a Hit
The banking sector, which constitutes a significant portion of the ASX, led the market’s decline following the inflation report. Commonwealth Bank of Australia, the largest stock in the nation, fell by 1.3%. National Australia Bank dropped 1.6%, Westpac lost 1.2%, and ANZ Bank slipped 0.4%.
Wesfarmers, a major player in the retail sector with brands like Kmart, Officeworks, and Bunnings, also saw a decline, falling 1.3%.
Woolworths Bucks the Trend
In contrast to the broader market trend, Woolworths shares rose by 1.5%, despite the supermarket giant reporting weaker-than-expected sales figures for the September quarter. CEO Amanda Bardwell acknowledged that the company’s performance was below expectations, with food sales at its supermarkets increasing by 2.2%, missing analyst forecasts.
Jarden analyst Ben Gilbert noted, “There appear to be some (very early) green shoots,” referring to Woolworths’ October food sales, which increased by 3.2%.
The upcoming annual general meeting for Woolworths is expected to be a critical moment for Bardwell, as she addresses shareholders amid rising pressure and competition from Coles, which has been gaining market share. Coles shares declined by 0.6%.
Energy and Mining Sectors Show Mixed Results
Oil and gas companies, including Woodside and Santos, continued their downward trend as oil prices fell due to signs of oversupply. West Texas Intermediate dropped 1.9%, settling near $US60 a barrel. Consequently, Woodside was down 1.2%, and Santos shed 0.8% in early trading.
On a more positive note, mining giants BHP and Rio Tinto experienced gains, rising 0.7% and 0.2%, respectively. Gold miners also saw a recovery, with Northern Star climbing 2.7%, Evolution Mining up 2.9%, and Newmont increasing by 1.8% as gold prices steadied near $US3950 an ounce.
Global Market Influences
Overnight on Wall Street, the S&P 500 added 0.2%, the Dow Jones rose 0.3%, and the Nasdaq composite climbed 0.8%, with all three indexes reaching all-time highs for the third consecutive day.
The Federal Reserve’s upcoming decision on interest rates, as well as corporate earnings reports, are anticipated to be significant market movers. President Donald Trump’s meeting with China’s leader Xi Jinping is also expected to influence global economic dynamics.
In the tech sector, Apple and Microsoft both saw gains, with Microsoft reaching a valuation of $US4 trillion, joining Nvidia in this exclusive club. Amazon rose 1% following an announcement of job cuts and increased investment in artificial intelligence.
Clark Bellin of Bellwether Wealth commented, “We expect another strong round of megacap tech earnings reports, given the relentless demand for AI technology and infrastructure.”
As the market continues to react to these developments, all eyes are on the Federal Reserve’s next moves and their potential impact on both the local and global economic landscape.
