Australia’s sharemarket extended early losses to end Wednesday down more than 50 points after monthly consumer price data showed inflation had spiked in May.

The S&P/ASX 200 dropped 0.7 per cent to 7779.5. It had fallen earlier as much as 1.1 per cent after May consumer price index data showed inflation had spiked to 4 per cent. That was up from 3.6 per cent in April and above consensus for a 3.8 per cent reading.

The interest rate sensitive banking, real estate and consumer discretionary sectors were all sold off as bond traders ramped up bets that the next cash rate move from the Reserve Bank would be upwards. Real estate ended the session the worst hit, falling 2 per cent.

Rate woes

“We weren’t expecting the RBA to cut rates until the second half of 2025, but the hotter-than-expected CPI print today indicates this could be even further away,” said VanEck’s head of investments Russel Chesler.

Chesler added that Australia could now be one of the few developed markets to raise rates further.

“Forget ‘higher for longer’ – we may end up being the ‘highest for the longest’,” he said.

Following the data, money markets are now pricing in a 54 per cent chance of a rate rise to 4.6 per cent by September, up from just 13 per cent before the report.

Elsewhere on the local bourse, it proved a volatile session for lithium miners, which began the session among the worst performing on the index before rallying later in the day.

Liontown Resources ended 3.3 per cent higher at 93¢, after falling as much as 5 per cent at the open. Pilbara Minerals also staged a late-session comeback, ending the day 2.5 per cent higher at $3.23.

The volatility in stocks followed declines in the price of front-month China lithium carbonate futures, which fell 5 per cent to $US12,000 a tonne on Tuesday to now be down 15 per cent over the past month.

Tech stocks were among the best performing on the index, rallying 0.8 per cent after US chipmaker and sector bellwether Nvidia snapped a three-day losing streak to rally 6.7 per cent higher Wednesday morning AEST.

Stocks in focus

In corporate news, medical device developer Polynovo rallied 6.6 per cent to $2.41 after brokers at Wilsons upped their price target for the stock by 9 per cent.

Pathology group Healius fell 1.3 per cent to $1.48 following a weaker-than-expected earnings update released yesterday, which sparked a flurry of broker revisions overnight.

Collins Foods slid 8.9 per cent to $9.37 after rallying more than 7.3 per cent on Tuesday following a report showing record revenue and a six-fold jump in statutory net profit in 2024.

Shares in retailer Harvey Norman lost 7.6 per cent after analysts from Barrenjoey cut their valuation on the stock to $4.00 from $4.50 due to weaker macro conditions.

And shares in uranium developer Bannerman Energy were halted ahead of a proposed $76 million capital raising. The stock is expected to resume trading on Friday.