Local shares edge lower after US inflation rates

Joanna Guelas | May 11, 2023

Australian shares are down slightly again after softer-than-expected US inflation data helped improve risk sentiment.

At noon AEST on Thursday, the benchmark S&P/ASX200 index was down 17 points, or 0.2 per cent, to 7238.

The broader All Ordinaries was down 16 points, or 0.2 per cent, to 7436.

Inflation data released on Wednesday night, Australian time, revealed the price of goods and services in the US rose 4.9 per cent in the 12 months to April.

Though remaining high, the annual rate of inflation has been dropping since hitting a 40-year high of 9.1 per cent last June.

IG market analyst Tony Sycamore says whether the CPI report was “good or bad” is not yet apparent given a “messy session” for key US stock indices.

The Dow Jones closed lower for the seventh session in eight, while the Nasdaq closed at its highest level in eight months.

Mr Sycamore said there might be an answer in the bond market’s reaction, where yields at the front end fell 12 basis points.

“Both headline and core inflation are heading in the right direction,” he  said.

The ASX’s 11 sectors were a mixed bag at noon, with information technology experiencing the biggest gain, up by 1.4 per cent.

Wisetech Global rose by 2.7 per cent to $70.05, Xero gained 1.9 per cent to $94, and Nextdc climbed 1.9 per cent to $12.

Weighing down the market were the industrials and utilities sectors, which fell by 0.6 per cent and 1 per cent respectively.

In the materials sector, lithium producer Allkem experienced one of the biggest wins after its $15 billion merger announcement.

Brisbane-headquartered Allkem, which is focused on lithium production in Argentina, said on Thursday it had agreed to an all-stock merger with the New York Stock Exchange-listed Livent.

Current Allkem shareholders would own 56 per cent of the combined company, which at recent stock prices would be worth $US10.6 billion ($A15.7 billion). 

Allkem was up 15.6 per cent to $14.93 at noon, but other mining companies were not having as good a day. 

BHP was down by 1.4 per cent to $43.81, and Rio Tinto had dropped 1.8 per cent to $108.96.

Looking forward, the Bank of England on Thursday night, Australian time, will announce whether it is hiking interest rates.

The Australian dollar was buying 67.75 US cents, from 67.66 US cents at Wednesday’s ASX close.