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Australian shares declined for a second consecutive session, pressured by weakness in real estate and discretionary sectors after inflation data surpassed forecasts. The benchmark S&P/ASX 200 fell 0.3% to 8,898.30, following a 1% drop earlier in the week. Consumer price index data showed a 1.3% rise in the third quarter, exceeding expectations of 1.1%, largely due to higher housing and travel costs. With inflation running higher than anticipated, investors scaled back expectations of an interest rate cut by the Reserve Bank of Australia, with fewer than 7% now expecting policy easing.
Australian equities continued to slide as investors reacted to stronger inflation data that tempered hopes for an interest rate cut from the Reserve Bank of Australia (RBA). The S&P/ASX 200 index slipped 0.3% to 8,898.30 points, extending the previous session's nearly 1% fall. The decline reflected cautious sentiment after the latest consumer price figures suggested that inflationary pressures remain persistent. Advertisement
Recent data indicated that Australia's consumer price index rose 1.3% during the third quarter, outpacing analysts' forecasts of a 1.1% increase. The rise was mainly attributed to higher housing and travel costs, signaling that living expenses are still elevated despite earlier signs of easing inflation. The report prompted markets to reconsider their expectations, with most investors now projecting that the RBA will hold its 3.60% cash rate steady in its upcoming policy review. Market pricing suggests that fewer than 7% anticipate a rate cut in the near term, underscoring the central bank's cautious stance on inflation control.
The real estate sector bore the brunt of the sell-off, extending its losses for a second session with a 2.8% decline. Among major developers, Stockland Corporation saw its shares fall around 4.3%, weighing on sector sentiment. Rising borrowing costs and subdued housing demand have continued to pressure property-related stocks throughout recent months.
Consumer discretionary shares also weakened, falling 2.4%, with electronics retailer JB Hi-Fi emerging among the session's biggest laggards. Its shares dropped as much as 7.4% after reporting a sequential slowdown in first-quarter sales growth across its Australia and New Zealand businesses. The sharp dip pushed the stock to its lowest level in nearly three months, reflecting investor unease over waning consumer spending amid sustained cost-of-living pressures.
In contrast, the consumer staples sub-index edged up 0.2%, supported by gains in Woolworths Group. The supermarket chain's positive performance helped offset declines in smaller rival Coles Group, which fell to a two-month low despite reporting a rise in first-quarter sales revenue. Analysts at Jefferies observed that Woolworths may have started closing the performance gap with Coles after increasing inventory levels and enhancing value-based offerings toward the end of the quarter.
Energy stocks stood out as an exception to the broader market weakness, climbing 0.7% on the back of higher global oil prices. Banking shares also posted modest gains of 0.2%, adding some stability to the index. However, the overall sentiment remained cautious as investors awaited further clarity on inflation trends and the RBA's response in the coming weeks.
Broader market conditions have been fragile in recent months, with rate-sensitive sectors such as property and retail showing limited recovery amid uncertain economic indicators. Analysts note that the stronger inflation data has reinforced expectations that monetary easing may be delayed, suggesting continued challenges for sectors exposed to consumer demand and financing costs.
Source Reuters
5th Jun, 2025
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