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Higher inflation data deters ASX investors

Steven DeareAAP
The ASX was a little lower in the wake of inflation data.
Camera IconThe ASX was a little lower in the wake of inflation data. Credit: AAP

Higher inflation figures rocked investor confidence on the Australian share market as traders pondered the prospect of an earlier rate rise.

The market reached its highest levels of Wednesday before the Australian September quarter data, which showed underlying inflation rose 0.7 per cent. House and fuel prices were mostly responsible.

For the first time in six years, annual underlying inflation (2.1 per cent) met the Reserve Bank's target range for raising rates.

In response, investors sold more stock. The ASX indices dipped and closed little changed.

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The Australian dollar rose but stayed within the 75 US cents band.

St George senior economist Jarek Kowcza said investor expectations were growing that the Reserve Bank would lift the cash rate sooner than planned.

The central bank has said a rate rise will not happen before 2024.

Yet Mr Kowcza claimed underlying inflation would move to the upper end of the RBA target range by the end of next year.

"Australia isn't immune to growing inflationary pressures that have impacted other economies," he said.

Energy prices have been a prominent force and have contributed to higher inflation in China and the US.

Mr Kowcza tipped a rate rise for Australia in 2023.

Overseas, investors are waiting for US economic growth data this week. The figures might influence whether the Federal Reserve changes its timeline for reducing economic stimulus.

Earnings reporting continues in the US. Coca-Cola, General Motors and McDonald's are among those due next and could sway markets.

In Australia, ANZ Bank will give full-year earnings on Thursday. Shares were little changed.

There will be quarterly updates from Coles and Fortescue Metals.

The annual general meetings will include Boral, JB Hi-Fi and casino operator Star Entertainment.

In the latest trading day, rate rise concerns did not deter investors from telecommunications and healthcare shares. They were best on the market.

Consumer staples, materials and utilities had the greatest falls.

The consumer category was mostly affected by Woolworths.

The supermarket giant fell after reporting sales have slowed following the easing of lockdown restrictions in the ACT, NSW and Victoria.

The lockdowns helped first quarter sales rise 7.8 per cent compared to the same period last year.

Shares dipped 3.24 per cent to $39.16.

The benchmark S&P/ASX200 index closed higher by 5.3 points, or 0.07 per cent, to 7448.7.

The All Ordinaries closed down 1.3 points, or 0.02 per cent, to 7758.

Shares in A2 Milk fell steeply after reporting sales of Chinese label infant formula were expected to be significantly lower in the first half of the financial year.

The company said consumers were no longer prioritising overseas brands such as its own. Fewer babies being born in China is not helping, either.

Shares slipped almost 12 per cent to $6.03.

There were notable losses among the miners. Fortescue lost about two-and-a-half per cent. BHP and Rio Tinto each lost more than one per cent.

Banks fared better. NAB was best and rose 1.38 per cent to $29.30.

Communications equipment supplier Codan has won a military contract to supply radios.

The DTC Communications subsidiary secured a multi-year deal and will receive $37.6 million from the first order.

However, Codan boss Donald McGurk said parts of the group's performance remained difficult to forecast.

Shares were down more than 18 per cent to $10.95.

The Australian dollar was buying 75.18 US cents at 1725 AEDT, higher from 75.15 cents at Tuesday's close.

ON THE ASX

* The benchmark S&P/ASX200 index closed higher by 5.3 points, or 0.07 per cent, to 7448.7 on Wednesday.

* The All Ordinaries closed down 1.3 points, or 0.02 per cent, to 7758.

* At 1725 AEDT, the SPI200 futures index was up by one point, or 0.01 per cent, at 7421 points.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 75.18 US cents, from 75.15 cents on Tuesday

* 85.75 Japanese yen, from 85.52 yen

* 64.81 Euro cents, from 64.72 cents

* 54.62 British pence, from 54.56 pence

* 104.96 NZ cents, from 104.70 cents.

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