ASX up after inflation eases again

The Australian share market surged to a two-week high after lower than expected inflation data diminished the chance of a September rate hike. Picture: NCA Newswire/ Gaye Gerard

The Australian share market enjoyed a third day of gains after cooler than expected inflation eased pressure on the Reserve Bank to hike interest rates when it meets next Tuesday.

Following a positive lead from Wall Street overnight, the S&P/ASX 200 index was up 87.2 points, or 1.2 per cent, to 7297.7 points at the close of markets.

Nine of 11 sectors finished in the green, led by industrials, healthcare and technology which all recorded gains in excess of 1.5 per cent. Utilities were down 0.02 per cent, and telecommunications lost 0.2 per cent.

The All Ordinaries was similarly strong, up 90.4 points, or 1.22 per cent, to close at 7,506.8 points.

Shares in BHP group rose 1.5 per cent, while Rio Tinto added stronger gains of 2.1 per cent.

The Australian share market enjoyed a third day of gains, led by industrials, health and tech. Picture: NCA Newswire/ Gaye Gerard

In the penultimate day of the reporting season, Brambles rose 7.1 per cent after the pallets manufacturer reported it would lift its dividends.

After posting a 17.2 per cent slide in sales for 2022-23, retailer City Chic fell 4.4 per cent.

The monthly CPI data showed inflation fell to 4.9 per cent, undershooting market expectations for a deceleration to 5.2 per cent.

The Aussie dollar and bonds fell following the CPI release.

CommSec chief economist Craig James said the July inflation report was the major driver for gains on the Australian share market after it showed that price pressures were returning to the RBA’s target band.

“If you average the last three to four months, you’re getting an annual rate of 3 per cent, which is where the Reserve Bank wants it – the 2 to 3 per cent target band,” Mr James said.

A cooler than expected inflation makes additional rate hikes unlikely anytime soon, CommSec chief economist Craig James said. Picture: NCA Newswire/ Gaye Gerard

In good news for borrowers, Mr James said the latest inflation print meant that additional rate hikes were unlikely to be on the cards anytime soon.

“We saw the share market go sharply higher by around 1.2 per cent, and we had gains right the way across the day,” Mr James added.

With major retailer Harvey Norman set to reveal its 2023 results on Thursday, traders would be closely following to determine the robustness of consumer spending in the face of a cost of living crunch.

“When we’re looking at [Harvey Norman] we’re seeing if consumer spending continues to cool and if it does, that's just more encouragement for the Reserve Bank that the higher interest rates are working.”

With the seasonally weak month of September ahead, the local share market is likely to have more downside risk unless we see a rebound in US or Chinese markets.