Hotter than expected inflation data fuels fears of February interest rate rise

A slump in technology stocks and a higher than expected inflation reading have led to a slide in the local sharemarket.

The benchmark ASX 200 dipped 7.70 points, or 0.09 per cent, to 8933.90, while the Broader All Ordinaries also traded in the red, down 17.90 points, or 0.19 per cent, to 9250.60.

Australia’s dollar temporarily hit a two-year high of 70.16 US cents before sliding to 70.03 US cents.

On an overall weak day of trading, just energy and mining stocks traded higher.

Leading the gains were energy stocks after the price of oil reached a four-month high, with West Texas Intermediate up to $62.32 a barrel.

Australia’s major oil producers traded higher, as Woodside jumped 2.71 per cent to $24.98 and Santos closed 3.02 per cent higher to $6.82.

Mining stocks also outperformed on strong commodity prices, with sliver, gold and copper all extending their gain.

Shares in BHP added 1.71 per cent to $50.60 and Rio Tinto jumped 2.39 per cent to $154.82.

Gold producers Northern Star Resources climbed 3.25 per cent to $28.60, Evolution Mining leapt four per cent to $15.35 and Newmont Corporation closed up 1.58 per cent to $183.79.

Offsetting the gains were consumer sensitive stocks, including technology and consumer discretionary shares.

These stocks fell after the release of Australia’s all-important trimmed mean inflation rate for the three months until December came in higher than expected at 0.9 per cent – or 3.3 per cent for the year, up from 3.2 per cent.

Technology shares slumped during the afternoon’s trading following the inflation print.

WiseTech global dropped 3.76 per cent to $60.70, Xero fell 1.92 per cent to $97.91 and Dicker Data slid 0.88 per cent to $10.18.

Betashares chief economist David Bassanese forecasts the hotter than expected inflation figures mean interest rates need to rise in February.

“All up, it appears to be game, set, match for a rate rise at the February policy meeting,” he said.

Mr Bassanese warned mortgage holders that a rate hike in February might not be the last one.

“The RBA might also raise rates again at the May policy meeting,” he said.

“To my mind, two rate hikes – given our highly indebted and interest-rate-sensitive economy – should be more than enough to dampen economic growth again and rein in ongoing inflation pressures in areas such as housing, travel and hospitality.”

In company news, Boss Energy shares soared 10 per cent to $1.98 after telling the market it had reduced cost guidance while confirming its production target of 1.6 million pounds at its Honeymoon uranium operation.

Life360 shares plunged 7.61 per cent to $28.52, to be the biggest laggard despite not making a company announcement.

Sports wearable technology company Catapult shares slumped 6.83 per cent to $3.68, after chief executive Will Lopes sold 1.3 million shares.