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Shares fell for a third day after the biggest jump in inflation since the introduction of the GST increased pressure on the Reserve Bank to raise rates.

The S&P/ASX 200 declined 38 points or 0.52 per cent by mid-session. The fall extended the benchmark’s three-day loss beyond 300 points or 4 per cent.

Banking and tech stocks led the retreat. Energy producers rebounded after Chinese stimulus hopes helped stabilise commodity markets overnight.

What’s driving the market

The odds of an election-month rate rise narrowed after the Australian Bureau of Statistics reported a sharp increase in the cost of living. Consumer prices jumped 2.1 per cent last quarter for an annual growth rate of 5.1 per cent.

The increase in the quarterly trimmed mean inflation measure favoured by the RBA was the strongest on record at +1.4 per cent. The annual trimmed mean climbed to 3.7 per cent, far above the bank’s 2-3 per cent target range.

“Annual trimmed mean inflation was the highest since 2009. This reflected the broad-based nature of price rises, as the impacts of supply disruptions, rising shipping costs and other global and domestic inflationary factors flowed through the economy,” Head of Prices Statistics at the ABS, Michelle Marquardt, said.

The dollar bounced 0.15 per cent to 71.52 US cents.

The chief economist at BetaShares, David Bassanese, said the central bank should raise the cash rate by 15 basis points at next week’s meeting, rather than delaying until after the federal election.

“AU inflation beats expectations on both headline and core measures by some margin, these data seem to demand an immediate response as the cash rate sits at 0.1%,” Bassanese said.

“Confirms my view that the RBA will raises rates by 15bps next week. Why wait?” he tweeted.  

Alex Joiner, chief economist at IFM Investors, said, “These data make it abundantly clear that the RBA should raise interest rates at its May meeting.”

The market was already under pressure following heavy falls on Wall Street. The Nasdaq Composite plunged almost 4 per cent to its biggest loss since 2020. The S&P 500 shed 2.81 per cent.

“US stocks fell sharply last night as fears of an economic slowdown gripped investors amidst intensifying inflationary pressures. The recent outbreak of coronavirus cases in Beijing spooked investors, fuelling concerns around additional lockdowns and their impact on global economic growth,” Kunal Sawhney, chief executive of research group Kalkine, said.

Major winners from the pandemic stay-at-home economy have copped the biggest hiding as the Nasdaq fell into a bear market. Zoom, Peloton and Robinhood have fallen more than 80 per cent from their peaks. Netflix is down 65 per cent. Facebook owner Meta Platforms has fallen 44 per cent.

Going up

Energy producers and some of the major miners rebounded after Chinese authorities pledged further support for the economy. The news helped stem heavy selling in crude, iron ore and base metals through the first half of the week.

Fortescue Metals climbed 1.59 per cent, BHP 1.27 per cent and Woodside Petroleum 0.98 per cent. Santos firmed 0.83 per cent. Rio Tinto inched up 0.19 per cent.

Further down the food chain, Whitehaven Coal improved 4.32 per cent, Champion Iron 2.14 per cent and South32 2.35 per cent.

Downer EDI rallied 4.62 per cent as shareholders warmed to an investor day presentation.

City Chic Collective bounced 1.54 per cent off an 18-month low on news online sales increased by 77 per cent across the first half. Total sales were 25 per cent higher than the prior corresponding period.

Going down

Growth stocks felt the heat from the threat of higher rates. PointsBet skidded 7.62 per cent, Afterpay owner Block lost 6 per cent and Zip Co gave up 5.61 per cent.

Mobile app-maker Life360 slumped 24.72 per cent after scrapping plans to list in the US. The tech safety specialist said preparations for a dual listing had ended due to “the change in the market conditions”.  

Lithium miners were temporarily out of favour as investors booked profits in some of this year’s best performers. Liontown Resources shed 5.19 per cent, AVZ Minerals 4.72 per cent and Pilbara Minerals 3.76 per cent.

Gold Road Resources dipped 1.6 per cent after reaffirming full-year production guidance. Improving head grades helped the miner increase production and generate $85.4 million in sales revenue last quarter.

Northern Star slid 4.36 per cent after forecasting lower production and higher costs at its Pogo mine. The miner also reaffirmed full-year production guidance.

The surprise resignation of CEO Andre Reich drove The Reject Shop down 17.65 per cent to its lowest in almost two years. The discount retailer said Reich would stand down immediately to “pursue other opportunities”. Chief Financial Officer Clinton Cahn will act as CEO.

Paul O’Malley will succeed Catherine Livingstone as chair of the Commonwealth Bank‘s board of directors. The bank announced Livingstone will retire in August. The share price dipped 1.08 per cent.   

Other markets

Mainland Chinese stocks fell for a third day. The Shanghai Composite dropped 0.44 per cent. Hong Kong’s Hang Seng shed 0.73 per cent, the Asia Dow 1.22 per cent and Japan’s Nikkei 1.88 per cent.

S&P 500 futures rallied 10 points or 0.24 per cent.

Oil added to overnight gains. Brent crude firmed 50 US cents or 0.5 per cent to US$105.11 a barrel.

Gold reversed US$2.10 or 0.1 per cent to US$1,901.90 an ounce.

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