Bourse surges to record high as inflation cools faster than expected

The share market hit a new high on Wednesday as better than expected inflation figures raised hopes of an end to interest rate hikes.

Cooler than expected inflation propelled the benchmark to a record high on Wednesday as investors raised their bets that the Reserve Bank would cut interest rates this year.

The benchmark S&P/ASX200 index reset its record intraday high to 7,682.3 points, before finishing slightly lower at 7,680.7, up 1.1 per cent to its highest close on record.

After rising for eight consecutive sessions, the ASX200 booked its longest winning streak since August 2021.

Meanwhile, the broader All Ordinaries also came within 43.5 points of its record, rising 1 per cent to 7,912.8

Against the greenback, the Australian dollar was sharply lower, falling 0.6 per cent to US65.63c, as bond yields dived on heightened expectations of rate cuts.

Money markets are now fully priced for two rate cuts before the end of the year. Picture: NCA Newswire

Fresh inflation data showed consumer price growth eased to 4.1 per cent in the December quarter, down from 5.4 per cent in the quarter prior – and the lowest for two year.

The result was far softer than consensus expectations for a 4.3 per cent rise, and came in under the central bank’s own forecast of 4.5 per cent.

Following the figures, money markets ascribed a 78 per cent chance that the central bank will cut interest rates at its June meeting, and are fully priced for two rate cuts before year’s end commencing in August.

Westpac chief economist Luci Ellis said the Reserve Bank would keep the cash rate on hold at its first meeting of the year next week, and it was unlikely to raise rates further this cycle.

“Today’s CPI release seals the deal,” she said.

Noting the increase in house prices and recent uptick in productivity, Ms Ellis said some of the risks the RBA had identified had “not come to pass”.

“We continue to expect the first rate cut no earlier than September.”

Interest rate sensitive utilities and real estate stocks were the top performers after rate cut expectations were bolstered. Picture: Suppled.

All 11 of industry sectors finished in the green, led by interest rate sensitive real estate and utilities stocks which added 2 per cent and 1.7 per cent, respectively.

Property sector heavyweights rallied with Dexus and Lendlease rising 2.6 per cent to $7.80, and $7.41 respectively. Lifestyle Communities up 1.9 per cent to $18.03.

The utilities sector was buoyed by heavyweight Origin Energy which added 2.7 per cent to $8.52, its highest level since November 27. On Monday, the company upped its stake in UK-based renewable energy firm Octopus Energy with an investment of $354.3 million.

Elsewhere in corporate news, nickel miner IGO lost 2.2 per cent to $7.56 after it announced it was placing its Cosmos mine on care and maintenance amid a deteriorating outlook for the commodity,

Infant milk formula producer Bubs Australia vaulted 4.6 per cent to 12c as the company said it was on track to achieve its guidance for the 2024 financial year.

Weebit Nano shares plunged 9.9 per cent to $3.48. Investors were offloading the semiconductor company after it posted quarterly revenue of less than $500,000 and announced it expected no royalty payments from its clients this year as they continued to ramp up production.

Shares in Sayona Mining shed 4.8 per cent to 4c. In its latest quarterly update, the lithium miner revealed a 76 per cent decline in revenue quarter on quarter to $23m.

Financials also performed strongly, up 1.5 per cent, as the big four banks posted gains between 1.3 per cent and 1.5 per cent.

Originally published as Bourse surges to record high as inflation cools faster than expected