Aust shares at five-month high as inflation drops again

The local share market has hit a five-month high after inflation came in below forecasts, raising expectations the Reserve Bank will keep interest rates on hold.

At noon AEST on Wednesday, the ASX/ASX200 index was up 54.8 points, or 0.75 per cent, to 7,394.5, and had earlier breached 7,400 for the first time since mid-February.

The broader All Ordinaries was up 53.7 points, or 0.71 per cent, at 7,608.4.

The Australian Bureau of Statistics earlier reported that consumer prices rose 0.8 per cent in the June quarter and 6.0 per cent annually.

Core inflation – a measure that strips out volatile food and fuel items – came in at 5.9 per cent in the past 12 months, down from 6.6 per cent in the previous quarter and below the RBA’s forecast for 6.0 per cent.

Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia, said there were still some concerns over labour costs but the data would likely buy the Reserve Bank more time and allow it to keep rates on hold a little longer.

“It looks like the RBA got what they wanted with this latest set of inflation figures,” said City Index senior market analyst Matt Simpson.

The rally in the ASX200, and a simultaneous plunge in the Australian dollar, showed that traders were pricing in a pause, he said.

The Aussie fell nearly half a per cent in the five minutes following the inflation readout, dropping from 67.75 US cents to 67.41 US cents.

At midday it was buying 67.51 US cents, from 67.68 US cents at Tuesday’s ASX close.

Eight of the ASX’s 11 sectors were higher at midday with mining up the most, climbing another 1.9 per cent following Tuesday’s 2.7 per cent gain after China unveiled new stimulus measures.

BHP had climbed 2.6 per cent to $47.01, and Fortescue and Rio Tinto had both added 1.9 per cent, to $23.64 and $121.395, respectively.

Mineral Resources had gained 3.7 per cent despite missing June quarter guidance at its Wodgina lithium mine in WA.

All of the big four banks were higher, with CBA adding 0.9 per cent, NAB climbing 1.6 per cent and ANZ and Westpac both up 1.5 per cent.

Austal had plunged 11.3 per cent to $2.28 after the shipbuilder downgraded its full-year guidance by $58 million, saying it could lose as much as $10m in 2022/23.

There’s been efficiency issues with Austal USA’s first steel shipbuilding project, an ocean-going rescue tug for the U.S. Navy, Austal said.

“The underlying issue is that the T-ATS award was received just prior to a period of unprecedented hyperinflation,” Austal CEO Paddy Gregg said of the “clearly disappointing” result.