Australian sharemarket claws back to flat after ‘immediate’ inflation data sell-off

Rebecca Le MayNCA NewsWire
a2 Milk continues to struggle with the loss of the lucrative Chinese diagou market.
Camera Icona2 Milk continues to struggle with the loss of the lucrative Chinese diagou market. Credit: Supplied

The Australian sharemarket yet again finished barely changed, with the benchmark index scraping into the green by just a few points after new inflation data sparked a sell-off.

The S&P/ASX200 firmed just 5.3 points to 7448.7, while the All Ordinaries Index slipped 1.3 points to 7758.

CommSec analyst Steven Daghlian said the ASX had a positive but cautious start to the trading session ahead of the latest Australian Bureau of Statistics inflation figures, which showed the consumer price index representing a basket of goods rose 0.8 per cent in the September quarter.

It’s this week’s most significant Australian economic news, partly for what it means for interest rate hikes, Mr Daghlian said.

The local bourse faded after the figures were released, then staged a steady comeback, but wound up flat.

“The headline numbers were bang on expectations, but the trimmed mean numbers, which is what the RBA watches most closely, was actually above what the market was expecting: 0.7 per cent growth over the quarter, compared to 0.5 per cent.

“And 2.1 per cent growth over the year compared to (an expected) 1.8 per cent. So this is the strongest annual growth rate in inflation in almost six years and it means that inflation is back within the RBA’s 2-3 per cent target range.”

Camera IconThe overall inflation rate rose but fruit prices have slumped, both the ABS and Woolworths noted. Brad Fleet Nicki Credit: News Corp Australia

OMG chief executive Ivan Tchourilov said the above-forecast result immediately triggered a sell-off in both equities and bonds.

“The ASX 200 index fell 47 points in the 30 minutes following the announcement and bond yields rose across the board,” he said.

“The RBA is holding firm, but this will only increase the market’s expectation of an early rate hike.”

Both the ABS and Woolworths noted fruit prices fell markedly, due to favourable growing conditions and reduced demand from the food service industry.

Woolworths made the observation in its quarterly report and said it had felt the impact of global supply disruptions as it stocked up shelves for Christmas.

Group sales were up 7.8 per cent compared to the same quarter last year, including food sales in Australia growing by nearly 4 per cent and by almost 10 per cent in New Zealand as customers ate more at home.

But store closures and trading restrictions slashed Big W sales by 17.5 per cent.

This month, customers in NSW started to return to eating out as restrictions eased, but Big W sales trends improved as Greater Sydney stores reopened.

Shares in Woolworths, which also held its annual general meeting, fell 3.24 per cent to $39.16.

Investor day was not a good day for A2 Milk shareholders, with the company slumping almost 12 per cent to $6.03 as it continues to struggle with the collapse of the important Chinese diagou infant formula reseller market.

a2 Milk continues to struggle with the loss of the lucrative Chinese diagou market.
Camera Icona2 Milk continues to struggle with the loss of the lucrative Chinese diagou market. Credit: Supplied

“The presentation confirmed we won’t be getting back to July 2020 heights any time soon and the lucrative Chinese market is not the river of gold it once was,” Mr Tchourilov said.

“The key takeaway from today was uncertainty, which management isn’t shying away from.

“On the other hand, shareholders can and will get away from as much uncertainty as possible, resulting in today’s sell-off.

“The now $6 mark is an enticing price for entry for anyone looking to buy, but beware of the question mark hanging over forecast revenue.”

Water control products maker Reliance Worldwide had a delayed bull run, gaining 4.6 per cent to $5.44 after releasing its quarterly on Tuesday, Mr Tchourilov said.

“The vote of confidence came from Ord Minnett, who gave the quarterly a tick of approval this morning, after which the stock has been heavily bought,” he said.

“This will typically happen to companies with less traded volume or industries in which most investors don’t have much expertise.

“Still, the numbers don’t lie. The plumbing parts supplier announced quarter-on-quarter growth across the board plus lower cost margins.

“They’ve also purchased a US distributor of plumbing supplies, EZ-FLO, to expand their presence in North America.”

Marley Spoon has started up a pet food business. Picture: Supplied by Marley Spoon
Camera IconMarley Spoon has started up a pet food business. Supplied by Marley Spoon Credit: NCA NewsWire

Marley Spoon rocketed 8.33 per cent to $1.62 with advising US investment giant BlackRock Group now holding 6.55 per cent in the meal kit delivery company.

It announced on Monday it had entered the booming pet food market with a new “vertical” called bezzie, while customers of Marley Spoon and its budget arm, Dinnerly, started earning rewards points as part of the Woolworths loyalty program as of Tuesday.

Shares in Youfoodz left the boards after its takeover by HelloFresh.

ANZ inched two cents lower to $28.39, Commonwealth Bank put on 0.95 per cent to $106.10, National Australia Bank gained 1.38 per cent to $29.30 and Westpac improved 0.62 per cent to $25.95.

Rio Tinto appreciated 1.83 per cent to $94.14, BHP dropped 1.44 per cent to $37.66 and Fortescue shed 2.58 per cent to $14.

The Aussie dollar was fetching 75.18 US cents, 54.58 British pence and 64.8 Euro cents in afternoon trade.

Originally published as Australian sharemarket claws back to flat after ‘immediate’ inflation data sell-off

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