The ASX has reacted positively to news that inflation has slowed.
The S&P/ASX200 gained 32.30 points or 0.45% to 7,285.60. Over the last five days, the index has gained 0.74% but is down 2.14% for the last year to date.
Top-performing stocks in this index are Whitehaven Coal (ASX:WHC) Ltd and New Hope Corporation Limited, up 8.53% and 6.55% respectively.
Looking at the sectors, Energy, Materials and Real Estate led the way up 1.36%, 1.32% and 1.21% respectively. Consumer Staples, Health Care, Communication Services and Utilities all lost around 0.41 to 0.43%.
Making news today
Inflation slows but it is a false positive?
Annual headline inflation fell to 6.9% in October. That was well below market expectations, which had been expected to climb 7.6% month-on-month.
The decline was due to a sharp fall in food prices, including fruit and vegetables. Holiday costs and lower accommodation prices also contributed to the better-than-expected numbers.
“This month’s annual movement of 6.9% is lower than the 7.3% movement in September, however CPI inflation remains high,” ABS head of Prices Statistics Michelle Marquardt said.
“Annually, prices for fruit and vegetables rose by 9.4% in October, down from 17.4% in September,” the ABS said.
The lower figures are likely to ensure the Reserve Bank of Australia (RBA) hikes the cash rate by just 0.25% next month. The RBA expected consumer price inflation to peak at about 8% this quarter – that is now looking too pessimistic.
And while today’s figures could be a hint that inflation is peaking, it may also be a false positive.
The trimmed mean rose a relatively muted 0.3% in October – the smallest increase since November 2021.
Annual growth in the trimmed mean slowed to 5.3% in October, from 5.4%: analysts had predicted around 5.7%.
The RBA trimmed the expected peak for interest rates to 3.65%, from 3.72% before the CPI release and as much as 4.20% last month.
However, the data contains only about two-thirds of the price data used in the ABS's traditional quarterly CPI. What does this mean? The risk of the inflation outcome for the entire October-December quarter could be much higher.
The October release does not include utility costs, which are likely to jump along with rising electricity and gas prices.
"We wouldn't read too much into the drop in the Monthly CPI Indicator in October because the figures don't cover the entire CPI basket," Capital Economics senior economist Marcel Thieliant said.
"Nonetheless, the figures do suggest that inflation is about to peak."
City Index senior market analyst Matt Simpson said, “Whilst Australia’s final inflation print for the year remains high by historical standards, it was much lower than expected at 6.9% y/y. But the re-weighting of the CPI basket is also a factor to consider.
“Australian inflation ‘only’ rose 6.9% y/y, down from a peak of 7.4% and lower than the 7.5% expected.
“Housing (10.5%), food and non-alcoholic beverages (8.9%) and transport (7.4%) were the most significant contributors
“CPI rose 0.2% m/m, below its long-term average of 2.5%.
“The RBA will be happy to hear that inflation was much lower than expected, even if it does remain historically high. But the ABS report also highlighted that they performed their annual weight adjustment to the CPI basket and that inflation would have been 7.1% if last year’s methodology was used.
"But even a move down from 7.4% to 7.1% is noteworthy as it leaves the potential that inflation has in fact peaked.
“If we look more broadly at inflationary drivers, it’s nice to see import prices are falling, wages remain well below inflation and that inflation expectation remain ‘well anchored’.
"So now we’ve seen annualised inflation drop 5 percentage points in a month, the case for RBA to pause in December is becoming stronger for a central bank that really does not want to raise rates any more than they need to.”
Fortescue (ASX:FMG) appoints new CEO for mining arm
Fortescue Metals Group (ASX:FMG) has appointed Woodside operations vice president Fiona Hick as new chief executive of its mining arm.
Hick will take up the position in February. She moves into the position after Elizabeth Gaines (for whom she is now a direct replacement), finished in August this year.
Hick will oversee keeping costs down at Fortescue’s iron ore operations, the commissioning of Fortescue’s troubled Iron Bridge magnetite project and the ambitious $US6.2 billion (A$9.2 billion) plan to decarbonise its iron ore operations by the end of the decade.
There are several challenges in this.
“There‘s rising input costs. We all need to be attuned to that and that’s part of why streamlining and simplification will be part of our focus,” Hicks told The Australian.
“But they are pressures that are on every company and so it’s really important that we do whatever we can to get in front of that.”
Hick will work in tandem with founder Dr Andrew ‘Twiggy’ Forrest who holds the role of executive chairman.
“Fiona’s highly strategic operational mind and her easy natural leadership of people is typical of a character that is always vulnerable to new ideas. This is critical in the constant search for simplicity and streamlining that is Fortescue,” Forrest said in a statement.
“Fiona has the natural humility and adaptiveness to flourish in Fortescue’s rare leadership environment through values, as opposed to command and control. Fiona has the right personality to lead our metals organisation.”
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