Sharemarket flat as quarterly inflation rebounds

Shares erased their early gains on Wednesday after firmer-than-expected inflation data took traders by surprise.

Australian shares finished flat on Wednesday after firmer-than-expected quarterly inflation figures prompted traders to slash their bets that the Reserve Bank would deliver rate cuts this year.

At the closing bell, the benchmark S&P index was just 0.5 points off to 7683, while the broader All Ordinaries inched 0.4 points lower to 7937.5.

Even as the share market climbed early in the session, the benchmark erased all its gains after the Australian Bureau of Statistics reported that inflation accelerated to one per cent in the March quarter, outpacing economists’ expectations of a 0.8 per cent increase.

Markets ascribe just a 19 per cent chance the Reserve Bank will cut interest rates at its December meeting. Picture: NCA NewsWire / Martin Ollman

Following the release, money markets ascribed just a 19 per cent chance the RBA would deliver a rate cut at its final meeting this year, scheduled for December.

On Tuesday, interest rate futures inferred an 80 per cent chance of a cut.

Economists at Citi, Westpac, UBS, AMP and RBC Capital Markets all deferred their rate cut forecasts following the CPI reading.

Jettisoning her forecast for a rate cut in September, Westpac chief economist Luci Ellis said the fresh inflation data was indicative of the “slow grind” in disinflation.

“Given the slower progress on disinflation this quarter and the lower starting point for labour market slack, we now expect the first rate cut to occur after the November meeting,” Dr Ellis said.

The Australian Dollar pushed higher against the greenback, peaking at US65.25c.

Meanwhile, yields on three-year Australian government bonds vaulted 11 basis points to 4.04 per cent — the highest this year.

On the benchmark, seven of 11 industry sectors finished in the red, with utilities stocks the biggest laggard, down 0.6 per cent.

Interest rate sensitive tech and real estate stocks also slipped, down 0.4 per cent and 0.2 per cent, respectively.

As the iron ore price traded above $US118 per tonne on the Singapore exchange, heavyweight miners were mixed.

While BHP slipped 0.6 per cent to $45.23 and Rio Tinto sank 0.2 per cent to $129.38, Fortescue climbed 0.7 per cent to $24.76 even as it reported lower shipments of the key steelmaking ingredient quarter-on-quarter, below analyst forecasts.

Financials stocks were the top performers, advancing 0.4 per cent, with all big four banks finishing in the green. Picture: NCA Newswire

Financials were the best performing sector, advancing 0.4 per cent.

The big four banks all finished in the green, led by Westpac up 0.9 per cent to $26.19.

CBA added 0.4 per cent to $115, NAB climbed 0.5 per cent to $34 and ANZ rose 0.3 per cent to $28.54.

In corporate news, money manager Perpetual slid 3.5 per cent to $23.83 after it reported net outflows of $5.2bn in the March quarter.

Furniture retailer Nick Scali entered a trading halt ahead of an announcement on entry into the UK market, its mooted acquisition of Fabb Furniture and an equity raising. Shares last traded at $14.07.

Shares in Lynas Rare Earths sank 0.3 per cent to $6.38, after the miner posted a 58.3 per cent drop in its March quarter sales revenue due to lower commodity prices amid soaring Chinese output.

Online white goods and electronics retailer Kogan dived 27.5 per cent to $5.10.

While profits and margins increased over the March quarter, sales were six per cent lower than the corresponding quarter a year earlier.

Cleanaway Waste Management sank 10 per cent to $2.71 and was the worst performer on the ASX200 after it denied media reports it was in takeover talks with Seven Group.