Share market dives as resumption of rate hikes in play

After stronger than expected economic data, traders have built up bets that the Reserve Bank could hike interest rates again.

Australian shares dived on Friday in one the largest single session declines of the year, as fears intensified that the Reserve Bank would have to resume its aggressive run of rate hikes.

At the closing bell, the benchmark S&P/ASX200 index shed 1.4 per cent, or 107.1 points, to close at 7575.9, with all 11 industry sectors finishing in the red.

Across the shortened trading week, the index finished 0.1 per cent higher.

The broader All Ordinaries fared slightly better, sliding 1.3 per cent to 7837.4.

The Australian dollar advanced, up 0.3 per cent to buy US65.40c at 5pm.

Bond traders ascribe a 52 per cent chance the Reserve Bank will hike rates at its August meeting. Picture: NCA NewsWire / Christian Gilles

Following Wednesday’s hotter-than-expected inflation, yields on 10-year Australian government bonds vaulted a further 19 basis points to 4.59 per cent, as traders moved to price out the prospect of rate cuts this year.

“The message we are inclined to take from the CPI is be patient. That doesn’t just apply to the economic data flow, but it also applies to the easing cycle,” ANZ chief economist Adam Boyton said.

“It is likely to start late this year and will be very mild.”

While money markets had ascribed a 70 per cent chance of a rate cut prior to the fresh inflation print, on Friday bond traders tore up their interest rate bets.

Interest rate futures now indicate a 52 per cent chance that the RBA will increase the cash rate to 4.6 per cent at its August meeting.

On the benchmark, industrials were the biggest laggards, falling 2.2 per cent, as sector heavyweight Transurban shed 3.6 per cent to $12.44.

Financials also finished sharply lower with all of the big four banks finishing in the red.

CBA shed 1.8 per cent to $112.99, NAB sank 1.4 per cent to $33.51, while Westpac and ANZ were both off 1.9 per cent to $25.69 and $27.99, respectively.

Even as Fortescue advanced 3.4 per cent to $25.59 and Rio Tinto added 1.1 per cent to $130.85, the materials sector dropped 1.4 per cent after ASX heavyweight BHP’s made a $60bn takeover offer for Anglo American.

Investors appeared unconvinced with BHP’s $60bn bid for Anglo American. Picture: NCA NewsWire / Aaron Francis

Confirming it had rejected the proposal, Anglo American labelled the bid as “opportunistic” and significantly undervalued the company. BHP’s shares traded down 4.6 per cent to $43.15.

In individual stocks, Newmont was the top performer, jumping 13.9 per cent to $65.70, as its March quarter results eclipsed forecasters’ estimates.

Shares in Resmed advanced 9.6 per cent to $31.50 after it announced it’s a 29 per cent jump in net profit to $US300.5m ($458m).

The healthcare company’s sales reached $1.1bn in the March quarter, it reported.

Super Retail Group slumped 3.4 per cent to $14.37 after it said it was expecting to defend allegations brought against the company by two employees.

The retailer, which claims the allegations are without merit, expect the pair to claim loss and damage up to $50m.

IGA and Total Tools parent MetCash slipped 0.3 per cent to $3.89 even as the competition watchdog approved its proposed acquisition of wholesale food distributor Superior Food Services.