Banks, miners drag Australian shares lower after hot inflation data revives hike odds

Australian shares fell on Thursday, dragged by heavyweight banks and miners, a day after hotter-than-expected inflation data revived bets of a rate hike as early as next week.

The S&P/ASX 200 index fell % to 8,890.40 by 2333 GMT.

The benchmark slipped 0.1% on Wednesday.

Data on Wednesday showed a key trimmed-mean core inflation rising 0.9% in the December quarter, above the 0.8% forecast and the Reserve Bank of Australia’s (RBA) preferred 0.75%, pushing the annual rate to 3.4%, well outside the central bank’s 2%-3% target band.

Markets now assign a more than 70% chance of a quarter-point hike in the 3.6% cash rate, up from 60% before the data, with a move to 3.85% fully priced by May and 4.10% seen by September.

Even ANZ analysts have shifted their call, now expecting a hike at next week’s RBA meeting but still treating it as a lone move as inflation is expected to cool through the year.

On the bourse, financials extended losses to fall 0.5%, with top lender Commonwealth Bank of Australia shedding 0.8%.

Miners advanced slipped 0.4% after iron ore futures extended their decline on Wednesday. Subindex giants BHP, Rio Tinto and Fortescue lost between 0.5% and 1.5%.

Rate-sensitive real estate stocks lost 0.8% to hit an eight-month low.

Capping losses, energy stocks leapt 0.8% to touch a near five-month high after oil prices surged overnight.

Whitehaven Coal rose as much as 4.35% after its second-quarter output beat expectations on improved mining conditions and stronger volumes from its Queensland and New South Wales sites. Gold stocks rose 0.9% after gold extended its record-setting rally overnight.

Sub-index heavyweight Northern Star Resources climbed as much as 2.97%.

Meanwhile, New Zealand’s benchmark S&P/NZX 50 index edged 0.3% lower to 13,374.39.