Banks, miners lower as ASX slumps

Welcome to your five-minute recap of the trading day.

The numbers

The Australian sharemarket has slumped on the back of Wall Street falling after US inflation came in higher than expected as US President Donald Trump’s tariffs start to hurt consumers.

The benchmark S&P/ASX 200 index finished down 68.5 points to 8561.8 on Wednesday, a drop of 0.8 per cent, while the broader All Ordinaries fell 58.9 points, or 0.7 per cent, to 8816.4. Nine of the ASX’s 11 sectors finished lower, with energy climbing 0.1 per cent and technology gaining 0.9 per cent.

The Australian dollar was trading for US65.25¢, from US65.55¢.

Wall Street retreated after inflation came in higher than expected but Nvidia helped prop up indexes.Credit: AP

The lifters

Information technology was one of two sectors ending the day ahead. Nuix was a standout, rising 7.6 per cent, network service provider Megaport was up 6.3 per cent, Wisetech Global gained 0.6 per cent, and Xero 0.9 per cent. Life360 added 0.5 per cent.

Infratil was up 4.3 per cent after S&P Dow Jones Indices announced the New Zealand-based infrastructure investment company would be added the ASX 200 next week, replacing Spartan Resources, which is being acquired by Ramelius Resources.

Droneshield was up 3.8 per cent, taking its gains to more than 40 per cent this week after announcing on Monday a ramp-up in production capacity.

The laggards

Financials were the biggest mover, dropping 1.4 per cent amid falls for all the big four banks. NAB, which is facing questions over chief executive Andrew Irvine, slumped 3.4 per cent, while Commonwealth Bank lost 1.2 per cent, Westpac shed 1.5 per cent and ANZ Bank lost 0.6 per cent.

The heavyweight mining sector dipped 1.2 per cent, with Newmont posting the worst performance in the ASX 200. The goldmining giant fell 5.7 per cent to a one-week low of $87.70 after announcing it had sold its stakes in Greatland Resources and Discovery Silver Corp for $US470 million ($720 million). Other goldminers were also in the red even as the yellow metal traded for $US3347 an ounce, about $US10 more than on Tuesday.

Northern Star slid 2.1 per cent, Genesis Minerals dropped 3.6 per cent and Evolution retreated 2.3 per cent after forecasting higher mining costs in 2025/26.

Other miners were mixed. BHP was down 0.7 per cent, Fortescue gained 0.5 per cent and Rio Tinto edged 0.2 per cent higher. The British-Australian giant announced on Tuesday that its Australian head of iron ore, Simon Trott, will take over from outgoing chief Jakob Stausholm. The miner also released quarterly production numbers, with its Pilbara iron ore achieving its highest Q2 production since 2018. Iron ore rose above $US100 a ton on improving sentiment over Chinese economic growth, and as Rio Tinto Group brought forward its timeline for the first shipment from a massive mine in Guinea.

The lowdown

Confidence took a hit on the local sharemarket, which dropped from record levels after US government data showed inflation re-accelerated in June, reducing the odds that the world’s biggest economy will reduce interest rates any time soon.

US stocks felt pressure from a report showing inflation in the US accelerated to 2.7 per cent last month from 2.4 per cent in May.

Economists pointed to increases in prices for clothes, toys and other things that tend to get imported from other countries. Their prices could be rising because of the tariffs that Trump has proposed on countries worldwide in hopes of getting them to open their markets further to US products.

The data “will likely dissuade the Fed from tinkering with interest rates at least for the next few months,” Tim Waterer, chief market analyst at KCM Trade in Sydney, wrote in a note.

Traders priced in somewhat lower odds that the Fed will cut rates more than once this year, and the probability of a move in September is now seen as only slightly higher than 50 per cent.

“The big question for the inflation picture is tariffs. It’s taking some time for tariffs to show up in the data, but it’s highly likely that a tariff-driven inflation reckoning is coming,” said Skyler Weinand at Regan Capital. “The Fed will want to watch the next several inflation and jobs reports before it makes any moves on rates.”

Mining giant Rio Tinto Group said US tariffs on its Canada-made aluminum generated gross costs of more than $300 million in the first half, in a sign of how Trump’s trade agenda is shaking up metals supply chains.

Overnight, the S&P 500 fell 0.4 per cent, though it’s still near its all-time high set last week, as 90 per cent of the stocks within the index fell. The Dow Jones dropped 436 points, or 1 per cent.

Tech stocks were an outlier, though, and the Nasdaq composite rose 0.2 per cent to set another record thanks to Nvidia, the market’s most influential stock.

“Inflation has begun to show the first signs of tariff pass-through,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

To be sure, the inflation rate reported on Tuesday morning wasn’t far from what economists expected. And an underlying measure of inflation that economists think is a better predictor of future trends accelerated by less than feared.

Altogether, the data helped cause Treasury yields to yo-yo a few times in the bond market before they began rising.

The yield on the 10-year Treasury climbed to 4.48 per cent from 4.43 per cent late on Monday. The yield on the two-year Treasury, which more closely tracks expectations for what the Federal Reserve will do with short-term interest rates, rose to 3.95 per cent from 3.90 per cent.

A further acceleration in inflation could tie the hands of the Fed, which has been keeping interest rates on hold this year after cutting them at the end of last year. That’s because lower rates can give inflation more fuel, along with a boost for the economy. Wall Street loves lower rates because they goose prices higher for stocks and other investments, and Trump himself has been clamouring for the Fed to cut more quickly.

Fed chair Jerome Powell, though, has been adamant that he wants to wait for more data about how tariffs affect the economy and inflation. Following Tuesday’s inflation report, traders are still overwhelmingly betting that the Fed will cut its main interest rate by the end of the year. But they pulled back their bets on the number of potential cuts, according to data from CME Group.

AAP, AP and Bloomberg

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