MELBOURNE/WELLINGTON, April 27 (Reuters) - Australian shares jumped 1 percent by midday on Wednesday, propelled by the big banks after surprisingly weak local inflation heightened expectations the central bank would cut interest rates at its meeting next week.
The S&P/ASX 200 index .AXJO climbed 53.9 points to 5,274.5 by 0239 GMT, near its highest level since early January.
New Zealand's benchmark S&P/NZX 50 index .NZ50 was trading down 0.2 percent or 14.7 points at 6,781.00.
The Australian market had been up around 0.3 percent ahead of the March quarter inflation data, then jumped when the report showed underlying annual inflation slowed to 1.6 percent, well below the Reserve Bank of Australia's target. saw the market pricing in chances of a rate cut going up to around 40 percent, from 13 percent earlier, CommSec market analyst Steven Daghlian said.
"The (share) market really started to take off after that. It's not a certainty there will be a rate cut, but it has increased the chances there will be one," Daghlian said.
Westpac Banking Corp WBC.AX , National Australia Bank NAB.AX and Australia and New Zealand Banking Group ANZ.AX all rose around 1 percent, while Commonwealth Bank of Australia CBA.AX was flat.
In early trade, Fortescue Metals Group FMG.AX had been among the top gainers, up as much as 5.4 percent, after flagging it was set to cut debt further, repaying $577 million in notes which would reduce its interest costs by $48 million.
BHP Billiton (LON:BLT) BHP.AX and oil stocks benefitted from a rise in oil prices to their highest level this year, with BHP up 0.9 percent, Santos STO.AX rising 3.2 percent, and Origin Energy ORG.AX up 3.9 percent.
On the down side, detention camp operator Broadspectrum Ltd BRS.AX fell 4.9 percent after the Supreme Court of Papua New Guinea ruled that Australia's detention of asylum seekers on PNG's Manus Island was illegal. biggest dairy producer, Murray Goulburn Co-operative Co MGC.AX sank more than 35 percent to a record low after slashing its profit forecast on weaker than expected sales to China. New Zealand, Fisher & Paykel Healthcare FPH.NZ weighed on the index, shedding 3.4 percent, likely hurt by the higher New Zealand dollar.
In the other direction, Orion Health Group OHE.NZ was trading up 2.0 percent. Earlier the company announced a new contract in Canada.
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