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Australia’s inflation rate fell faster than expected on an annual basis in May to a rise of 5.6% in the year to May 2023, below the expected rise of 6.1% and well below April’s annual increase of 6.8%, in a major sign the RBA’s rate hikes are having a strong impact in cooling inflation down under. The most significant price rises were Housing (+8.4%), Food and non-alcoholic beverages (+7.9%), and Furnishings, household equipment and services group (+6%). Offsetting the rise in CPI for the year to May 2023 was Automotive fuel prices dropping 8%, which is a significant decline on the April reading of +9.5%.

The local market responded very positively to the release of the CPI data with the ASX200 closing the midweek session up 1.10% led by a 2.14% surge in consumer discretionary stocks, a sector that has been beaten down in recent times due to higher interest rates restricting consumer spend on discretionary goods.

Over in New York on Wednesday, it was a mixed session as investors responded to comments made by Federal Reserve Chair Jerome Powell regarding the need for further tightening of monetary policy. Powell said on Wednesday that “more restrictive policy is still to come” as inflation remains above the target of 2%.

Chip stocks in the US took a hit on Wednesday after the Wall St Journal reported the US was considering new export restrictions to China, a major market for the chipmakers in the US.

On Wednesday, the Dow Jones closed Wednesday’s session down 0.22%, the S&P500 fell just 0.04%, and the tech-heavy Nasdaq rose 0.27%.

Over in Europe, markets closed higher on Wednesday as investors in the region closely monitored further comments made by central bankers and officials at the European Central Banking conference in Portugal. Bank of England Governor Andrew Bailey defended the Bank of England’s decision to hike rates by 50 basis points last week, while the overall message from the conference remained focused on “higher for longer”.

The STOXX600 rose 0.7%, Germany’s DAX rose 0.64%, the French CAC added almost 1%, and, in the UK, the FTSE100 rose 0.52%.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open 0.07% lower following a weaker session on Wall St overnight.
• On the commodities front this morning, oil has rebounded to trade 2.75% higher at US$69.56/barrel, coal is up 1.91% at US$127.90/tonne, gold is down 0.32% at US$1907.23/ounce and iron ore is up 2.67% at US$115.50/tonne.
• Japan’s consumer confidence data for June is out this afternoon, with consensus expecting a rise of 0.2 points to 36.2 as the economy continues recovering from pandemic-related disruptions.
• AU$1.00 is buying US$0.66, 95.31 Japanese Yen, 52.48 British Pence and NZ$1.09.
• Stocks trading ex-dividend today include Stockland, Transurban Group, APA Group and GPT Group. If you’ve been thinking about these stocks it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.

Trading Ideas:

• Bell Potter has initiated coverage of CSR (ASX:CSR) with a Hold rating and a price target of $5.60 noting the diversified manufacturing company boasts sector leading performance with operations in building products, aluminium and property development. The hold rating is due to CSR’s addressable backlog of work from Homebuilder nearing conclusion signalling the Building Products division of CSR approaches the backend of its pricing cycle. Bell Potter is attracted to the long-term market share opportunity for Hebel in Australia and tailwinds supporting CSR’s property portfolio.
• And Bell Potter has increased the price target on PointsBet (ASX:PBH) from $2 to $2.25 and maintain a speculative buy rating on the sports betting company after the announcement that Fanatics Betting and Gaming has increased its offer for PointsBet’s US business from US$150m to $225m in cash. DraftKings was in the running to buy the American operations however failed to finalise a binding offer by 6pm on Tuesday so the PointsBet board is recommending the increased Fanatics offer given its superiority in both terms of pricing and certainty.