Aust shares up 0.44pc after weak inflation

·4-min read

Australia's share market resumed its climb towards record heights after weaker than expected inflation figures encouraged investors that low interest rates will not rise any time soon.

The benchmark S&P/ASX200 index closed higher by 30.9 points, or 0.44 per cent, to 7064.7 on Wednesday.

The gain was the first this week, and helped the index closer to its record, 7197.2.

The All Ordinaries closed better by 24.5 points, or 0.34 per cent, to 7320.

The indices sprung to session highs (ASX200: 7077.5) after the consumer price index for the March quarter showed a rise of 0.6 per cent. The annual rate edged up to 1.1 per cent.

While there has been much data showing Australia's strong economic recovery from the pandemic, this was not one such set.

Burman Invest chief investment officer Julia Lee explained the market's reaction.

"The fact we've seen inflation below expectations is a huge positive for equity markets," she said.

Rising inflation can erode the value of money and put pressure on the Reserve Bank to raise the cash rate, leading to higher interest rates and borrowing costs.

CommSec chief economist Craig James said the inflation figures meant the Reserve Bank would keep the cash rate at the record low of 0.1 per cent until 2024.

The Australian dollar was buying 77.59 US cents seconds before the inflation data, then dropped to 77.25 US cents six minutes later.

Looking ahead, Ms Lee was mindful of the two-day US Federal Open Market Committee meeting beginning tonight.

Federal Reserve chair Jerome Powell will explain decisions, although Ms Lee said she did not expect changes to rates policy.

US markets were mostly lower, although Google parent Alphabet and Microsoft posted big profits after trade closed.

On the ASX, property shares fared best, higher by 1.45 per cent.

Developer Mirvac said home sales were on track to better full-year guidance, and rent collection was improving.

Shares rose 3.13 per cent to $2.64.

There were gains of more than one per cent for financials and energy.

Materials shares were the only ones lower, by 1.04 per cent. The iron ore price slipped, albeit from an 11-year high.

Iron ore specialist Fortescue lost 1.48 per cent to $22.62.

Coles reported its first drop in quarterly sales in more than a decade as spending returned to normal after coronavirus panic buying.

The company reported a 5.1 per cent drop in third-quarter sales to $8.76 billion.

Shares were up 1.47 per cent to $15.85.

ASX newcomer Airtasker said it would exceed full-year sales estimates in its prospectus, despite only listing in March.

The company raised the full-year sales forecast from $24.5 million to a range of $25.5 million to $26 million.

Shares were higher by 7.81 per cent to $1.38.

Retail group Premier Investments named a new chief executive after Mark McInnes decided to step down.

Richard Murray from JB Hi-Fi will take over from October 4.

Mr Murray's replacement at the electronics retailer is Terry Smart, who was JB Hi-Fi's boss from 2010-2014.

Premier shares were up 2.24 per cent to $26.47.

JB Hi-Fi shares were down 4.02 per cent to $45.61.

On Thursday, Fortescue will give an update on how much iron ore it dug, and sales, during the March quarter.

Woolworths will give a sales update from the same quarter, as will financial services provider IOOF and property group GPT.

The Australian dollar was buying 77.38 US cents at 1721 AEST, lower from 77.96 US cents at Tuesday's close.

ON THE ASX

* The benchmark S&P/ASX200 index closed higher by 30.9 points, or 0.44 per cent, to 7064.7 on Wednesday.

* The All Ordinaries closed better by 24.5 points, or 0.34 per cent, to 7320.

* At 1721 AEST, the SPI200 futures index was even to 7041.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 77.38 US cents, from 77.96 cents on Tuesday

* 84.36 Japanese yen, from 84.34 yen

* 64.15 Euro cents, from 64.52 cents

* 55.78 British pence, from 56.09 pence

* 107.45 NZ cents, from 107.80 cents.