Markets wrap: Inflation chaos smashes Aussie tech shares and major banks

A higher-than-expected inflation print sent investors scurrying from growth names and financial stocks, but there was still some bargain hunting.

Investors are reeling after the sharpest three-session sell-off since January as surging inflation and the likely acceleration of the rate hike cycle causes chaos among Australian banking and tech shares.

The local sharemarket continued its poor run of form on Wednesday as March quarter inflation data came in hotter than expected, forcing several economists, banks and analysts to bring forward their interest rate hike forecasts.

Consumer prices surged by 2.1 per cent for the quarter, with the annual rise now at a more-than-20-year peak of 5.1 per cent, easily outstripping what was expected on Wednesday.

The ASX 200 was already in the dumps following a dire overnight session in the US, but the CPI data triggered even more panic, knocking the index down by as much as 1.1 per cent.

Markets are now pricing in a 90 per cent chance that the RBA will lift the cash rate to 0.25 per cent next week. Picture: NCA NewsWire / Jeremy Piper

Traders soon regained their composure, but the appetite for equities remained subdued for a third straight session.

The index lost 56.8 points, or 0.8 per cent, to 7261.2 to extend its recent decline to nearly 4.5 per cent and hit a six-week low.

The broader All Ordinaries also slipped 0.8 per cent to 7547.0.

The Aussie dollar rose on the inflation data and was buying 71.82 US cents at the local close.

Markets are now pricing in a 90 per cent chance that the RBA will lift the cash rate to 0.25 per cent next week, a scenario that was an even probability just days ago.

Equity investors generally view rate hikes as a precursor to narrower corporate earnings and lower economic growth, meaning the more speculative areas of the market – such as technology and healthcare – suffer disproportionately.

Interest rate fears were also responsible for a volatile night on Wall Street.

Shares in the major banks also finished lower. Picture: NCA NewsWire / Jeremy Piper

Rising Covid cases in China and mixed earnings reports also took a toll, but CityIndex analyst Tony Sycamore noted that the tech-heavy Nasdaq was the biggest loser as the US Fed prepares to kick off a short and sharp rate increase cycle next week.

“Our medium-term view remains that ‘an already troubling backdrop is deteriorating’ for US stocks as the Fed tightens monetary policy to tame inflation while trying to engineer a soft landing,” Mr Sycamore said.

This pain was replicated among local tech and payment names during Wednesday’s session, including a 5.9 per cent fall for Afterpay owner Block Inc to $140.06, a 5.1 per cent fall for Zip Co to $1.015, and a 6.1 per cent fall for Sezzle to 84.5 cents.

Accounting software firm Xero lost 1.8 per cent to $94.55, Wisetech Global dropped 0.5 per cent to $44.45, Appen was 4.3 per cent down at $6.44 and Altium lost 0.8 per cent to $32.35.

Life 360 fell almost 30 per cent to $3.77 after it cited changed market conditions to halt its US listing.

An iron ore price rise also helped BHP claw back some of its recent heavy losses. Picture: NCA NewsWire / Jeremy Piper

Several names across the growth-orientated healthcare sector also finished in the red, including CSL, which fell 1.3 per cent to $265.89, and Resmed, which lost 2.5 per cent to $30.42.

Shares in the major banks also finished lower, with Commonwealth Bank down 1.7 per cent to $103, NAB also down 1.7 per cent to $32.20, Westpac losing 1.9 per cent to $23.35, and ANZ finishing the day 2.6 per cent lower at $26.91.

Macquarie Group dropped 1.7 per cent to $200.72.

There was, however, a couple of pockets of resistance in the market as investors sought to swoop in and nab a bargain among the beaten-up miners.

An iron ore price rise also helped BHP claw back some of its recent heavy losses with a 0.8 per cent gain to $46.01, while Rio Tinto rose 0.2 per cent to $108.96 and Fortescue Metals finished 1.7 per cent higher at $20.10.

Mineral Resources also rebounded with a 1.5 per cent rise to $55.49 and Champion Iron gained 3.4 per cent to $7.02.

Originally published as Markets wrap: Inflation chaos smashes Aussie tech shares and major banks