Australia Stocks Close Near Flat After Mixed Inflation Data

By Rebecca Thurlow

SYDNEY--Australia's share market ended nearly flat after inflation data failed to provide clarity on whether the Reserve Bank of Australia will likely cut official interest rates in August.

The S&P/ASX 200 finished up 2.2 points, or 0.4%, at 5539.7 on Wednesday.

The index started the session higher, taking its lead from U.S. stocks and higher iron-ore prices which boosted the mining sector. However, the local bourse drifted lower during the morning, accelerating its descent after the inflation data.

Australia's second-quarter inflation data was expected to show core inflation up 0.4% in the quarter, low enough to justify an interest rate cut in August. But it came in at 0.5%, complicating the decision.

The resource sector bounced after lagging the market in the past week following a strong rally in the first six months of the year. BHP Billiton ended 3.1% higher, Rio Tinto rose 1.9%. Fortescue surged 7% after reporting it cut production costs further in the April-June period, bolstering margins on the iron ore it sells.

Stocks in the health-care and utilities sectors were among the weakest, continuing to give up gains from earlier in the week when they benefited from a switch away from resources into more defensive investments. CSL ended 1.4% lower and Telstra slipped 0.8%.

Altair Asset Management Market Analyst Tristan K'Nell said with the inflation data out, all eyes now turn to the finish of the Federal Reserve's two-day meeting later Wednesday in the U.S.

"No rate hike is expected but their wording will be closely watched," Mr. K'Nell said. "It would seem that any hike would come after the presidential election, which is in November. So I think even with an improving economy the Fed is likely to hold off any moves till at least December at the earliest."

- Write to Rebecca Thurlow at [e-mail]

(END) Dow Jones Newswires

July 27, 2016 03:17 ET (07:17 GMT)

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