Australian shares continued their downward trend on Wednesday as fresh data revealed significant cost pressures in May. The S&P/ASX 200 index fell 0.75% to 7,780.10 points by 3:20 PM AEST, following a rise of over 1% on Tuesday. The primary sectors driving this decline were financial and mining stocks.
Inflation Data Raises Rate Hike Concerns
The Australian Bureau of Statistics reported an acceleration in the annual consumer price inflation to a six-month high in May. Additionally, a key core measure of inflation rose for the fourth consecutive month, prompting market speculation about the likelihood of another interest rate hike.
The Reserve Bank of Australia (RBA) acknowledged the challenging situation, stating it could not rule out further monetary tightening. The RBA highlighted that the current cash rate is already causing financial strain for many households, indicating a restrictive monetary policy environment.
Financial Stocks Take a Hit
Interest rate-sensitive financial stocks declined, with the sector index down 0.9%. The 'big four' banks—Commonwealth Bank (ASX: CBA), Westpac (ASX: WBC), ANZ (ASX: ANZ), and NAB (ASX: NAB)—each saw declines ranging from 0.5% to 0.9%. This sectoral decline reflects investor concerns about the potential impact of rising rates on borrowing and consumer spending.
Mining Stocks Follow Suit
Mining stocks also contributed to the market's decline, with the sector falling 1.7% due to weak iron ore prices. Shares of major mining companies BHP Group (ASX: ASX:BHP) and Rio Tinto (ASX: ASX:RIO) dropped by 0.22% and 0.61%, respectively. Gold stocks were particularly hard hit, dropping more than 2% to reach their lowest level since early April. Notable declines included Northern Star Resources (ASX: ASX:NST) and Evolution Mining (ASX: EVN), which fell 3.65% and 2.43%, respectively.
Energy and Technology Sectors Diverge
Energy stocks retreated by as much as 0.6%, driven by demand concerns in the United States, the world's largest oil consumer. In contrast, technology stocks bucked the overall market trend, advancing up to 0.8% in line with gains seen on Wall Street.
Star Entertainment Shares Surge
Amid the broader market decline, shares of Star Entertainment rose as much as 3.2%, marking their best day since early June. This surge followed the announcement of Steve McCann's appointment as the company's new Group CEO and Managing Director. McCann is set to start on July 8, with key responsibilities including implementing a remediation program and revamping the company culture.
Eyes on U.S. Inflation Data
Investors are now eagerly awaiting the U.S. personal consumption expenditures (PCE) price index, due on Friday. This index is the Federal Reserve's preferred measure of inflation and could provide further insights into the Fed's interest rate policy trajectory.
New Zealand Market Movement
In neighboring New Zealand, the benchmark S&P/NZX 50 index rose by 0.2% to 11,742.35 points, showing a slight positive movement amid the regional economic concerns.