Australian shares are edging higher after August inflation came in softer than expected, easing fears of back-to-back interest rate hikes, but price growth is still on the rise.
The S&P/ASX rose 71 points by midday, up 0.78 per cent, to 8,776.9, as the broader All Ordinaries gained 69.7 points, or 0.78 per cent, to 8,956.3.
The upswing countered a mostly flat start after headline inflation came in at 4.0 per cent in the year to August, undershooting estimates of 4.1 per cent but still well outside the Reserve Bank’s two to three per cent target range.
Investors welcomed the figures, which further lowered the odds of a November interest rate hike to follow Tuesday’s lift to 4.6 per cent, which came with assurances the RBA would wait to measure impacts before hiking again.
The RBA’s preferred trimmed mean measure held steady at 3.6 per cent for the month, with the Iran war continuing to add heat to inflation.
“Sustained higher oil prices are bleeding through prices beyond the pump, maintaining upward price pressure on core goods and services,” Oxford Economics economist Harry McAuley said.
“We expect this to continue into 2027 and forecast trimmed mean inflation to sit above three per cent until early 2028.”
Real estate trusts rocketed 2.6 per cent higher in a broad-based move, but the segment is still down by more than a tenth since August, when banks reported plunging home loan applications as high interest rates came up against softening home prices.
Beaten-down miners, consumer discretionaries and IT stocks were also major beneficiaries, with each sector up one per cent or more.
Traditionally defensive consumer staples was the only grouping significantly lower, dropping 0.7 per cent, while utilities lost less than 0.1 per cent and financials traded roughly flat.
BHP rose 0.8 per cent to $61.10, while Rio Tinto gained 0.6 per cent to $165.39, despite easing copper prices and a slump in iron ore futures to roughly $US94 a tonne.
Gold producers broadly improved as the precious metal traded near $US4,171 ($A5,989) an ounce, as South Africa’s Gold Fields Ltd tried to sweeten its takeover offer for Northern Star by touting the deal’s tax savings.
The energy sector gained 0.6 per cent despite weakness in refinery operators Ampol and Viva, after crude prices eased on reports of recovering oil flows through Saudi Arabia’s East-West pipeline following attacks by Houthi rebels.
In company news, Telix Pharmaceuticals dipped despite winning a fast-track designation by the US Food and Drug Administration for its pre-biopsy prostate cancer imaging program.
DroneShield announced a three-year delivery contract with the US Military for up to $US500 million ($A718 million), however no orders were guaranteed.
The Australian dollar is buying 69.68 US cents, down from 69.93 US cents on Tuesday at 5pm and trading at a two-month low as the interest rate outlook softened.
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