Australian shares retreated more than 1% on Thursday, with broad based losses across most sectors, after surprisingly strong consumer price data bolstered prospects of an interest rate hike by the country’s central bank.
The S&P/ASX 200 index fell 1.4% to 7671.3 by 0017 GMT, hitting its lowest level since May 31.
The benchmark ended down 0.7% in the previous session.
Data on Wednesday showed that Australia’s inflation in May rose much faster than expected to 4%, causing investors to anticipate increasing likelihood of rate hike from the Reserve Bank of Australia than a rate cut.
The country’s central bank had earlier reiterated that it is willing to hike rates if inflation proves to be sticky in the country.
Analysts at Morgan Stanley forecast the RBA to hike interest rates in August after the strong inflation data.
“A further hike with an expected hawkish bias in outlook is likely to see extended weakness in domestic trading conditions,” they said.
Australian shares hit record high; RBA cautious on inflation
Investors are also awaiting the US personal consumption expenditures price index - the Federal Reserve’s favoured gauge of inflation - due on Friday, which could provide further clues on the Fed’s rate cut trajectory.
In Sydney, interest rate sensitive financial stocks declined 1.7% to hit their lowest level in over a week.
All of the ‘Big Four’ banks fell more than 1.5% each. Heavyweight mining stocks retreated 0.7%.
Shares of BHP Group and Rio Tinto fell 1% and 0.7%, respectively.
Gold stocks dropped 1% to hit their lowest level since late March.
Gold miners Northern Star Resources and Evolution Mining shed 0.9% and 1.2%, respectively.
Energy stocks retreated 0.7%, while real estate stocks declined 3% to hit their lowest level since early May.
New Zealand’s benchmark S&P/NZX 50 index fell 0.4% to 11,786.1.
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