Tech stocks, banks bolster ASX despite higher-than-expected inflation

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

The numbers

The Australian sharemarket has pared back some early gains after higher-than-expected inflation numbers, but is still up for a fifth straight day as investors keep betting on another interest rate cut next month.

The S&P/ASX 200 was up 55.6 points, or 0.7 per cent, to 8126.2 when the market closed, after the local bourse pushed past the 8000 mark on Tuesday. Seven of the 11 industry sectors were in the green, led by tech stocks, healthcare and property companies and the banks. The Australian dollar was stable, trading at US64.15¢.

Investors fear Trump’s tariffs could bring a recession if left unaltered because they could freeze global trade.Credit: Bloomberg

Inflation data

In the March quarter, prices rose by a higher-than-expected 0.9 per cent, with the annual rate steady at 2.4 per cent, the Australian Bureau of Statistics said. The figure is closely watched by the Reserve Bank for its interest rate decisions, with the hotter inflation potentially throwing a spanner into expectations of a rate cut in May.

However, the trimmed mean inflation rate of 2.9 per cent was its lowest level since late 2021, and fell by 0.4 percentage points over the past three months.

Investors will still be expecting a rate cut after today’s inflation results. Credit: AFR

The key measures of underlying inflation were 0.7 per cent, in line with the Reserve Bank’s forecasts, with the weighted median at 3 per cent.

Deloitte Access Economics head Pradeep Philip said the figures showed a rate cut in May was still on the central bank’s agenda. He said with headline and underlying inflation back within the Reserve Bank’s target band, and with growing economic uncertainty overseas, it could safely cut rates.

A May rate cut “should be viewed as insurance against any collateral damage a trade war and geopolitical turbulence may cause the Australian economy,” he said.

The lifters

Software maker WiseTech Global added 1.1 per cent and TechnologyOne gained 2.5 per cent, while data centre operator Goodman Group rose 2 per cent and Westfield shopping centre landlord Scentre gained 1.7 per cent. The consumer discretionary sector also advanced as conglomerate Wesfarmers rose 1.6 per cent and electronics retailer JB Hi-Fi added 0.7 per cent.

The big four banks were trading higher, with Commonwealth Bank – the biggest stock on the ASX – gaining 2.2 per cent. Westpac was up 0.6 per cent, ANZ added 1.1 per cent, and NAB was up 0.5 per cent.

The laggards

It was a different story for energy and mining stocks, which were among the biggest winners of the previous session. Fortescue lost 1.1 per cent and gold giant Newmont fell 1.6 per cent after gold prices declined overnight. Rio Tinto lifted by 0.5 per cent. Iron ore heavyweight BHP was trading flat.

Energy and gas giants were mixed, with Woodside gaining 0.4 per cent and Santos falling 1.8 per cent as oil prices tumbled again overnight amid concerns over the fallout from Donald Trump’s global trade war. West Texas Intermediate slipped 2.6 per cent to settle below $US60 a barrel, the lowest close in more than two weeks.

Star Entertainment shares were flat at 10¢ after the struggling casino operator reported a third-quarter operating loss of $21 million. The company has agreed to a $200 million investment from US firm Bally’s and a $100 million investment from its biggest shareholder Bruce Mathieson earlier this month.

The lowdown

Commsec chief analyst at Ryan Felsman said Australian investors would be expecting another quarter-point rate cut when the Reserve Bank meets on May 20, despite the “darkening outlook for global economic growth” that’s been largely brought on by Trump’s tariffs.

“Rates are seen reaching 2.85 per cent or 3.1 per cent by the end of 2025, with the market having turned more ‘dovish’ since US President Trump announced the scale of his tariffs and the resulting worries about global growth,” Felsman said.

“Commonwealth Bank Group economists have retained our view that the RBA will cut rates by 25 basis points at the May, August and November 2025 meetings, taking the cash rate target to 3.35 per cent by year-end.”

Rate-sensitive tech stocks and real estate investment trusts were among the best performers on Wednesday.

In US markets, the latest tariff zigzag arrived for the car industry after Trump signed a pair of directives easing the impact of his tariffs on the industry, yielding to weeks of intense lobbying from vehicle makers, parts suppliers and dealers who warned that excessive levies could push up car prices, triggering plant shutdowns and job losses.

Under the first executive order, signed aboard Air Force One, imported vehicles were given a reprieve from separate tariffs on aluminium and steel, an effort to prevent multiple levies from piling on top of each other.

The change is another indication that the levies placed on trading partners are creating a volatile economic climate for American companies. Even with the reduction, car prices are still expected to increase by thousands of dollars.

General Motors slipped 0.8 per cent despite reporting stronger-than-expected profits for the latest quarter. The company rescheduled a conference call with investors to discuss its results and forecasts for 2025 to Thursday due to “recent reports regarding updates to trade policy”.

On Wall Street overnight, shares rose again as other companies recorded better profits than forecast. However, chief executives said they were unsure how long it would last, given the uncertainty around Trump’s trade war. The S&P 500 was up 0.6 per cent, extending its winning streak to a sixth day. The Dow Jones Industrial Average was up 0.8 per cent and the Nasdaq composite was 0.6 per cent higher.

Other stocks weren’t as strong, even though their companies also reported stronger-than-expected profits.

Investors fear that Trump’s tariffs could trigger a recession if left unchanged, as they could freeze global trade and drive up prices for a wide range of products. Trump’s on-again-off-again rollout could also, by itself, throw into disarray the long-term plans for spending and investment by businesses and households.

“President Trump creates what I would call strategic uncertainty in the negotiations,” US Treasury Secretary Scott Bessent told reporters at the White House.

Tweet of the day

Quote of the day

That’s because much that happens in the economy is caused by factors beyond a government’s ability to control.

That’s Ross Gittins’ latest commentary on the coming federal election. You can read more of it here.

With Shane Wright, Millie Muroi and AP

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