ASX loses steam as inflation surprise boosts rate rise chances

The Australian sharemarket shed early gains and closed flat after the country’s latest consumer price data revealed hotter than expected inflation, heightening the possibility of the Reserve Bank raising interest rates.

The S&P/ASX 200 closed on Wednesday at 8933.9, down slightly by 7.7 points, with just two of its 11 sectors higher – led by energy companies which rallied 2.33 per cent.

The Australian dollar broke through the US70¢ barrier as geopolitical turmoil pushed it to its highest since early 2023.

December’s consumer price index, released by the Australian Bureau of Statistics, shows prices increased a full percentage point last month, pushing the annual inflation rate up from 3.4 per cent to 3.8 per cent.

Underlying inflation, which is closely watched by the Reserve Bank, actually stepped down in December, climbing 0.2 per cent. The RBA sits next week and markets are now rating the chance of an interest rate rise at 70 per cent. Before they were 60 per cent.

Energy shares bounced following a rise in oil prices to their highest since October as US President Donald Trump touted a growing US military presence near Iran. Traders are monitoring the fallout from a sweeping winter storm and a weaker dollar which has boosted the appeal of commodities.

Woodside Energy jumped 2.71 per cent. On Wednesday, the company signalled a decline in oil and gas output this year despite the long-awaited start-up of its $16 billion Scarborough gas field off Western Australia.

The Perth-based fossil fuel giant reported its biggest production year ever, delivering the equivalent of 198.9 million barrels of oil in 2025. But it expects output to dip this year from a planned shutdown at its Pluto gas-processing plant.

Santos rose 3.02 per cent and Whitehaven added 0.99 per cent.

The performance of miners was strong. BHP, which on Tuesday took Commonwealth Bank’s crown as the most valuable stock on the bourse, added 1.71 per cent, while Rio Tinto added 2.39 per cent, but Fortescue retreated 1.1 per cent. Gold miners rose as Northern Star surged 3.25 per cent and Evolution Mining climbed 4 per cent.

Financial stocks are steady. Commonwealth Bank was up 0.19 per cent, while National Australia Bank, ANZ Bank and Westpac all edged down.

Overnight on Wall Street stocks ticked to a record but zigzagged under the market’s surface following mixed profit reports from UnitedHealth, General Motors and other big companies.

The S&P 500 rose 0.4 per cent and edged past its prior all-time high set a couple of weeks ago, even though more stocks fell within the index than rose. The Dow Jones dropped 408 points, or 0.8 per cent, and the Nasdaq composite climbed 0.9 per cent.

UnitedHealth Group tumbled 19.6 per cent despite reporting a profit for the latest quarter that was slightly better than analysts expected. More attention was on the company’s forecast for revenue in the upcoming year, which fell short of Wall Street’s expectations and could be weaker than it was in 2025.

Healthcare stocks also felt tremendous pressure from a projected rate increase for Medicare Advantage by the US government, which fell well short of what investors had hoped.

Supporting the US stock market were gains for General Motors, which rose 8.7 per cent, and hospital-operator HCA Healthcare, which rallied 7.1 per cent. Both delivered profits for the end of 2025 that topped Wall Street’s expectations. Each also approved programs to send billions of dollars to their investors by buying back their own stock.

The pressure is on companies to deliver strong growth in profits following record-setting runs for their stock prices. Stock prices tend to follow the path of corporate profits over the long term, and earnings need to rise to quiet criticism that stock prices have grown too expensive.

Several of Wall Street’s most influential stocks will deliver their latest earnings reports later this week. They include Meta Platforms, Microsoft and Tesla on Wednesday and Apple on Thursday.

With AP

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