Inflation continues to cool in Australia

Consumer prices rose 1.0% in the June quarter and 3.8% annually, the Australian Bureau of Statistics said. Photo / Getty Images

The Australian share market has surged to a nearly two-week high and the local currency has dropped to a three-month low after official statistics revealed that inflation has kept cooling off as expected, making another interest rate hike unlikely.

At noon AEST on Wednesday, the benchmark S&P/ASX200 index was up 91.2 points, or 1.15%, to a 13-day high of 8044.4, while the broader All Ordinaries had gained 91.6 points, or 1.12%, to 8268.2.

The ASX200 had already gained ground, hovering around 8000, and then jumped another 46 points in the space of three minutes after the Australian Bureau of Statistics released the inflation report.

Consumer prices rose 1.0% in the June quarter and 3.8% annually, the ABS said, while the Reserve Bank’s preferred metric, a measure known as “trimmed mean” inflation, fell from 4.0% to 3.9%.

Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said the readout was just a touch above the firm’s dovish expectations.

“The data reiterates our view that the interest rates are restrictive enough in Australia, and the next move by the RBA could very likely be a cut in November,” Bhimavarapu said.

The Australian dollar meanwhile fell from 65.35 US cents to 64.89 US cents in the space of two minutes following the inflation readout.

It’s the first time since April 30 that the Aussie has traded below 65 US cents.

Every sector of the ASX was higher at midday, with energy the biggest gainer, rising 1.9% as Woodside gained similarly, Santos added 1.3% and uranium miner Deep Yellow climbed 5.5%.

In the heavyweight mining sector, Rio Tinto had gained 2.7% to A$117.71 ($129.45) as the miner announced it made US$5.8 billion (A$8.9b) in profit for the six months to June 30, little changed from US$5.1b a year earlier.

“We are at an inflection point in our growth, with a step change from our aluminium business and consistent production at our Pilbara iron ore operations,” chief executive Jakob Stausholm said.

RBC Capital Markets analyst Kaan Peker said that Rio’s interim dividend was a touch lower than expected, but most other metrics were broadly in line with expectations.

Elsewhere in the sector, BHP was up 1.5%, South32 had climbed 1.7% and Fortescue had recovered 3.0% after Tuesday’s 10.2% selloff.

All of the big retail banks were higher, with CBA up 1.0%, NAB adding 1.3% and Westpac and ANZ both climbing 1.4% – the latter as it completed its A$4.1b acquisition of Suncorp’s banking arm.

“This strategically important acquisition boosts our presence in Queensland, adds scale to our retail and commercial businesses, and means we can compete more effectively across the Australian market,” said ANZ chief executive Shayne Elliott.

Suncorp climbed 1.7% as chairwoman Christine McLoughlin reiterated the insurance company’s intention to return the majority of the proceeds to shareholders via a special dividend, likely in early 2025.

Droneshield was in a trading halt so the defence contractor could announce a capital raising.

The Australian Financial Review reported that it would be for A$120 million at $1.15 a share, a 17.3% discount to its last close – and down from a peak of $2.60 just two weeks ago.