Australian shares traded lower on Wednesday as investors awaited crucial US inflation data and grappled with price hikes in China.
At 14:00 AEST, the ASX 200 was down 0.2 per cent.
Inflation has become one of the biggest issues facing economies globally as nations reopen after pandemic shutdowns, grapple with supply chain issues and grapple with the hangover of low emergency interest rates.
US inflation data will be released later on Wednesday AEST. This country has already been showing rising inflation.
This is also a problem here in Australia where, annually, the official rate is now 6.1 percent.
As a result, rate hikes are being implemented, affecting borrowers and discretionary spending.
Wall Street’s two majors fell overnight and the Nasdaq lost 1.2 percent as tech stocks were hit by fears of rising rates.
“Risk appetite remains cautious ahead of tonight’s US CPI data,” ANZ economists said in a statement.
Inflation data from the world’s largest economy could indicate that price rises are slowing or remaining flat.
High inflation could lead to further rate hikes, although the US Federal Reserve has already hinted that it won’t be too difficult.
China’s latest inflation data came out this morning, with its official numbers showing that prices rose by 2.7 percent. It is the highest since July 2020.
ANZ expects inflation in China to rise to between 3 and 4 percent soon, which is above the official target.
“This is largely due to an overlap between the pork and oil price cycles,” he said.
Pork has been rising in price as the nation still rebuilds stocks from the outbreak of swine fever, and as demand picks up again from restaurants following post-Covid reopenings.
Oil prices have also increased, for both edible oils and fossil fuels, also due to many recent supply chain issues.
China’s Hang Seng was down about 2% by mid-afternoon.
CBA drags the financial sector
The Australian share market followed global sentiment down in afternoon trade.
Of the 11 major sectors, 10 were down.
Commonwealth Bank was down 0.4%, even as it posted results that showed it increased its profits on the impact of the home loan boom. The results also showed that margins were falling, particularly with rate hikes affecting home loan margins.
All the other big banks were higher, with ANZ gaining as much as 3.5 per cent.
Other stocks that traded lower included A2 milk, which had lost more than 11 percent.
That was after it told the market it had been turned down by US regulators to sell its infant formula there.
Meanwhile, GrainCorp gained 5.9 percent after releasing its results.
GrainCorp raised its underlying net profit after tax forecast to between $365 million and $400 million, from $310 million to $370 million.
It said it was benefiting from good crop yields, which were fetching high world prices as the supply crunch continues due to the war in Ukraine.
GrainCorp also said it was benefiting from strong vegetable oil prices, which have soared due to a series of global supply issues.
Meanwhile, ANZ said in a statement that the Australian dollar was slightly lower after the US dollar “regained some strength amid higher US bond yields”.