ASX jumps as odds of June rate rise move close to zero — as it happened

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With US futures flat in early trade, there's no doubt that optimism about the growing possibility of no further rate increases helped to propel the local share market's afternoon rally.

This can be seen in some of the sectors that gained most strong, with discretionary retail and real estate up near the top.

There were some big moves for individual firms.

On the up side were data centre operators, most notably Megaport, with a lot of biotech and healthcare stocks also doing well.

The big banks also bounced back from fairly steep early falls following the inflation data.

Also worth an honourable mention is Nufarm, which jumped 13.7% after a well received first half profit report and outlook.

On the down side was the ASX itself, off nearly 10% amid rising operating costs, while liquor retailer Endeavour was off almost 5% after revealing its plans to exit the wine-making business.

Overall, the ASX 200 closed out the day up 0.7% at 8,718 points.

The Australian share market has really benefited from weaker-than-expected inflation figures.

Even though the headline numbers weren't that much lower than most forecasts, and the core inflation number was in line with both market and RBA expectations, the lack of an inflation spike has seen rate-rise expectations dialled back.

Financial market pricing suggests just a 6% chance of a rate rise in June, while also betting on a greater than 40% chance the RBA is done with its latest rate-rise cycle altogether.

That in turn saw the Australian dollar weaken slightly to 71.5 US cents and the benchmark ASX 200 share index jump 0.7% in the afternoon to 8,718 points.

S&P Global Ratings says Singtel’s plan to bring minority investors into Optus could raise questions about how strongly the Singapore telco would support its Australian business in the future.

The ratings agency is not changing Optus’s rating at this stage, and says Optus is still likely to remain strategically important to Singtel and majority controlled by it. But S&P says introducing partners with a significant minority stake may complicate the support mechanism from Singtel to Optus if financial help is needed.

"Our assessment of Optus's importance to Singtel and the potential for any transaction, including its structure and timing, will be key for the rating," S&P says.

"Optus's capital structure and financial policies will also be key watchpoints, given near-term capital expenditure needs for 5G network investment and about A$1.9 billion spectrum re-licensing total estimated payment from fiscal year 2029 (ending March 31).

"We treat the unpaid amount of the spectrum re-licensing as adjusted debt because we consider these payables to be debt-like."

Australia's April inflation result came in a little softer than expected, but NAB says it is not a clear sign that the inflation problem has gone away.

Headline inflation eased to 4.2 per cent over the year, down from 4.6 per cent in March. That was below both NAB and market expectations of 4.4 per cent.

The main surprise was softer food prices. NAB said: "Grocery inflation was a bit softer than expected in April."

Fuel also helped pull the headline number lower, with automotive fuel prices falling 7 per cent in the month. NAB said that was as expected, with a sharp fall in petrol prices partly offset by higher diesel prices.

But the Reserve Bank will probably focus more on trimmed mean inflation, its preferred measure of underlying price pressure. That rose 0.3 per cent in the month and 3.4 per cent over the year.

NAB's bottom line is that the April data looks broadly in line with what the RBA was already expecting.

"Uncertainty around inflation is elevated, but today's data looks to be tracking consistent with a 1.0% qoq trimmed mean outcome in Q2 in line with the RBA's May SoMP forecast."

In simple terms, this result is unlikely to dramatically change the RBA's thinking. It was not as bad as feared, but it is not soft enough to prove inflation is safely back under control.

There are still some warning signs. NAB says some parts of the economy most exposed to higher costs are starting to see prices pick up again, especially goods and new home building.

Want to dig deeper into April's inflation print?

The ABC Business Daily podcast has just been released, and my colleagues Dan Ziffer and Nassim Khadem break down the numbers and answer burning questions such as: What should we make of these numbers? How might they shape the RBA’s moves on next month’s rates decision? And is this a good or bad sign of the health of our economy?

The Australian share market has reversed earlier falls, picking up slightly after April headline inflation fell and rate-hike bets for next month were dialed back even further.

The ASX 200 has risen by 0.28% at 3pm AEST.

On the ASX 200, 130 stocks increased, 68 declined, and two remained steady.

Top and bottom movers are below.

Hi Josh, indeed, the ASX filing shows Hancock-linked entities have disclosed a relevant interest equal to 9.15% of Southern Cross Media.

Bruce McWilliam, a one-time confidant of billionaire Kerry Stokes, owns the Southern Cross Media shares, not Hancock. But a Hancock-linked company, Hanrine Finance, helped fund McWilliam's share purchases. Because of that, Hanrine has a legal interest in the shares, almost like a lender having security over a house when someone takes out a mortgage.

The ASX filing shows the financing structure, but the "why" is not stated. Local media reports suggest it may be linked to a McWilliam push for influence at South Cross Media, which now owns Seven Network, the Triple M and Hit radio brands and West Australian Newspapers.

Southern Cross Media shares have surged by 8.6%.

Few companies in the world are worth $US1 trillion or more.

Most of them are tech companies that have invested heavily in the fast-growing artificial intelligence (AI) sector, including Nvidia, Google, Apple, Microsoft, Amazon, Broadcom, Tesla and Meta (Facebook).

Now, Micron Technology is the latest company to join that exclusive club after its market capitalisation surged to $US1 trillion for the first time.

Overnight, Micron's share price jumped 19%, making it the 10th most valuable company on Wall Street.

What led to Micron's surge?

The main catalyst seems to be the investment bank UBS tripling its price target for Micron, from $US535 to $US1,626 per share.

That's an enormous vote of confidence, indeed.

Lately, investors have been looking to pour their money into tech stocks (other than Nvidia) that have massive growth potential.

Shares of the AI bellwether Nvidia have surged more than 1,200% in the past five years (and it is very unlikely to see its value explode again soon). So, investors wanting to get rich quickly will have to sniff elsewhere for rapid growth.

If you think the brand name Micron sounds familiar, there's a fair chance you may have bought their memory or USB flash drives for your computer in the past.

There's now a global memory shortage due to the insatiable demand from all the companies building AI data centres.

Given chipmakers such as Micron have been struggling to fill that shortage, they've been able to lift their prices and still have a guaranteed pipeline of sales in the years ahead.

That explains why Micron's share price has skyrocketed by more than 800% over the past year.

Intel, Qualcomm, Marvell and Advanced Micro Devices (AMD) and South Korean giant Samsung have also recently seen a sharp increase in their share prices for similar reasons.

As Michael Janda noted earlier, Australia's largest real estate network, the Ray White Group, is on the front foot about new anti-money laundering rules, which will cover real estate agents, accountants and lawyers (amongst others) from July 1.

The laws are called "Tranche 2" and require professionals who provide designated services, such as accountants, real estate agents and rare gem dealers, to know their clients, including appropriate identity checks, and to also report suspicious transactions to AUSTRAC (the federal anti-money laundering agency).

We were a bit of a lagger.

Out of more than 200 countries, Australia has been alongside China, Haiti, Madagascar and the United States in not regulating Tranche 2 entities.

Ray White is both large and sophisticated, so it can deal with the change. Here's what they've said about it:

"The complexity of property deals, often involving hidden corporate structures, overseas funds, or undisclosed trusts, has made it an attractive pathway for dirty money," Ray White agency compliance manager Shaun Doyle said in a press release.

"One in four property transactions are being paid for in cash and mortgage-free, which is a statistic the authorities are very interested in."

But is the rest of the industry ready?

The days of suitcases full of cash are over, the law says.

When it was still up in the air, the real estate industry was not a fan of the reforms.

Speaking to me in 2024, then Real Estate Institute of Australia president Leanne Pilkington said the draft legislation left some questions unanswered.

"Tranche 2 is all about activating the small business community to be the extended workforce for AUSTRAC and the Australian Federal Police to do their jobs effectively," she argued.

Speaking before the full details of the announcement were available, Ms Pilkington noted that substantial investment and training would be needed.

"The regulatory creep from the Albanese government across all portfolios is growing and creating more pain points when you consider anti-money laundering reforms, privacy reforms and cybersecurity reforms.

"Where is the collective cost-benefit [analysis] on the mum and dad business sector for this?"

Deloitte Access Economics partner Stephen Smith has a similar sentiment to Westpac regarding today's inflation print.

Smith says that while the headline gauge eased, it doesn't tell the whole story. Part of the relief is being helped by the government’s temporary fuel excise cut, which is due to expire soon. At the same time, higher global energy prices, shipping disruptions and shortages of key imports appear to be feeding into freight, construction and other business costs.

Underlying inflation rose to 3.4% over the year. That remains well above the Reserve Bank’s target band and points to a more persistent inflation problem than headline CPI alone suggests.

Even if the Strait of Hormuz reopens soon, global energy markets will take time to stabilise. The immediate shock may fade, but the pass-through to freight, production costs and consumer prices will take longer.

However, this does not mean the RBA will necessarily hike rates at its next meeting. April employment data showed a clear softening in the labour market, with unemployment rising and employment falling.

Employers appear to be making greater use of existing workers while slowing new hiring, particularly for younger and entry-level workers. That is a sign of a slowing economy and should, in time, reduce domestic inflation pressure as previous rate hikes continue to bite.

Smith noted that the RBA is essentially stuck between two risks: inflation is still too high, but the economy is already slowing. 

Deloitte’s view is that the RBA will likely hold in June, but a 25 basis point hike is likely in August.

Australia's April inflation figures were softer than expected, but Westpac says the details are not as reassuring as the headline number suggests.

The monthly consumer price index (CPI) rose 0.4 per cent in April, taking annual inflation to 4.2 per cent. That was down from 4.6 per cent in March and below both market expectations and Westpac's forecast.

Westpac says the downside surprise was largely driven by volatile or one-off categories, rather than a broad easing in inflation pressure.

“The headline figure was a welcome downside surprise, [but] it was not a view-changing one.”

The bank points to a sharper-than-expected fall in transport costs, softer international travel prices, lower fruit prices and a smaller rise in clothing and footwear as the main reasons inflation came in lower than expected.

But the more important measure for the Reserve Bank, trimmed mean inflation, still moved in the wrong direction on an annual basis. The monthly trimmed mean rose 0.3 per cent, while the annual pace edged up to 3.4 per cent, from 3.3 per cent in March.

Westpac says this shows underlying inflation pressures have not gone away.

"The April data show clearer evidence of emerging pass-through of upstream costs. Home-building is the most obvious example, but ongoing above-target inflation in categories such as takeaway food and restaurant meals are also consistent with pass-through building.

"The lift in upstream costs flowing into selling prices is also evident in the NAB business survey and ABS business indicators.

"Further construction trade price increases and the new fuel recovery rule for transport operators will add to near‑term cost pressures.

"Consequently, we still expect trimmed mean inflation to rise to around 4% over the coming quarters."

The Australian Council of Trade Unions (ACTU) has reacted to today's 4.2% annual increase in consumer prices by saying it strengthens the case for the 6% minimum and award wage increase it is seeking.

The Fair Work Commission is hearing the annual minimum and award wage case, with a decision expected in the second half of June.

That means that today's April inflation data is likely the last the commissioners will see before they make up their minds.

The Australian Industry Group, a business lobby, is arguing for a 3.9% increase, while the Australian Chamber of Commerce and Industry wants 3.5%.

Traditionally, Fair Work usually awards something in between business and worker demands.

The government would appear to support such an outcome, arguing for a real (above inflation) wage increase for award workers which, on today's data, would imply something above 4.2%.

ACTU secretary Sally McManus argues lower-paid workers deserve more.

"One in four workers in Australia rely on the Annual Wage Review as their only way of getting ahead of price rises," she said in a press release.

"Rent, mortgages, and bills are locked in, meaning if these workers' wages fall short of inflation, they have no choice but to cut back on essentials like food and doctors' visits.

"Minimum and award wage workers' pay make up about 10% of Australia's national payroll, and a 6% pay rise only adds 0.64% to the national wage bill. It is simply not possible for the union movement's claim to be inflationary."

According to a report from the Sydney Morning Herald's economics writer Millie Muroi, Fair Work expert panel member Mark Cully, who used to head the Macroeconomic Analysis and Policy division at Treasury, was rather incredulous about those claims at recent hearings.

"I guess I'm just puzzled by how blithe you are about the immateriality of seeking a 6 per cent wage increase and it having no material impact on the claims of other workers and on aggregate inflation over the course of [financial year] 26-27."

One of the big stories out of Canberra this week is the government's draft discussion paper on a domestic gas reservation policy.

So, is it a realistic plan? Does the government have political support from the opposition, and public support, too, as calls for a gas tax grow louder in some parts of the country?

And what would it actually cost, and mean, for the flow of gas to households and businesses?

Daniel Ziffer and Tom Crowley break it all down on Fuelcast on the ABC Business Daily podcast.

• ASX 200: steady at 8,660 points 
  
• Australian dollar: -0.13% to 71.58 US cents
• Wall Street: Dow Jones (-0.2%), S&P 500 (+0.6%), Nasdaq (+1.2%)
• Europe: Stoxx 600 (-0.6%), DAX (-0.8%), FTSE (+0.2%)
• Asia: Nikkei (+0.9%), KOSPI (+4.7%)
• Spot gold: steady at $US4,504/ounce
• Oil: Brent futures -0.9% to $US98.70/barrel, WTI futures -1.25% to $U92.72/barrel
• Iron ore: +0.1% to $US108.85/tonne
• Bitcoin: -0.45% to $US75,675

Prices current at around 12.30pm AEST 

 Live updates on the major ASX indices:

In a statement released after the ABS data, Treasurer Jim Chalmers has claimed some credit for the moderation in inflation.

"The results show that the government's decisive action to slash the fuel excise is helping to take some of the sting out of price pressures from the conflict," he argued.

"Automotive fuel fell 7.0 per cent in April, after rising 32.8 per cent in March. Treasury analysis shows that our cut to the fuel excise reduced headline inflation by around 0.5 of a percentage point."

Mr Chalmers added that fuel wasn't the only factor in today's slightly softer than expected inflation numbers.

"While fuel was a big driver of the moderation in today's data, it wasn't the only driver. There was also a welcome moderation in rent and food inflation."

Endeavour Group, the owner of Dan Murphy’s, BWS and hundreds of pubs, has today unveiled a sweeping strategic overhaul, focused on trying to simplify its business and focus on the parts that make the most money.

The big move is that it plans to exit most of its winery and vineyard assets. In simple terms, Endeavour does not want to keep owning lots of wine production assets if they are not generating strong enough returns. It will also reshape its Pinnacle Drinks business so it focuses on the best-performing drinks brands.

The company is also targeting $300 million in cost savings by 2029. That means cutting costs, simplifying operations and trying to make the business more efficient. This comes on top of an earlier $100 million cost-saving plan.

The main focus now is on its strongest retail brands: Dan Murphy’s and BWS. Endeavour wants Dan Murphy’s to stay known for strong prices, while making BWS better suited to convenience shoppers. Retail is the company’s most important division, making up more than 80% of group sales in 2025.

It is also changing its dividend policy. The group also revised its dividend payout ratio target to between 50% and 75% of underlying net profit after tax, saying the change in policy would ensure it maintains "appropriate funding flexibility" to execute its strategy.

For 2025, the group had logged a dividend payout ratio of 79%.

Endeavour shares have fallen 2.3% so far today.

With Reuters 

I think you're right, Phillip.

The latest (May) Statement on Monetary Policy from the RBA forecast headline inflation to peak at 4.8% in the June quarter this year, with the trimmed mean expected to hit 3.8%.

Starting the quarter with annual rates of 4.2% and 3.4% respectively gives a fair bit of wiggle room for inflation over the next couple of months to come in at or below those forecast levels.

Of course, as Harry McAuley from Oxford Economics Australia pointed out in his note, it really all depends on when the Strait of Hormuz reopens.

If that doesn't happen until the second half of this year, then most analysts agree we'll start seeing genuine global fuel shortages and all bets are off.

BDO chief economist Anders Magnusson says in a note that Australia's latest inflation data suggests price pressures are proving harder for the Reserve Bank to contain, but "it is unlikely to force an immediate response".

Headline inflation was always going to moderate a little, but remain elevated in April while energy prices stayed high, but the more important signal is that trimmed mean inflation has just started to rise.

That matters because trimmed mean inflation is the clearer measure of underlying price pressure that erodes living standards. In March, higher fuel prices lifted headline inflation sharply, but had not yet flowed through to broader prices. Today’s data suggests that flow-through has begun, with a slight increase in trimmed-mean inflation from 3.3 per cent to 3.4 per cent.  

This will be uncomfortable for the RBA and limits its scope to 'look through' the energy shock as a temporary disruption that will just roll by. The recent lift in unemployment suggests that higher interest rates may be starting to slow demand, but that is less meaningful if inflation remains high.

He believes it is more likely the RBA will hold next month and wait to see whether the three interest rate hikes this year cool inflation over time.

For households, a pause in rate hikes would not necessarily mean good news. It may also signal a weaker economy, softer jobs market, wages struggling to keep up with prices, and ongoing pressure from already-high mortgage repayments. The next few months will depend heavily on whether energy prices fall back, or whether global supply disruptions keep inflation higher for longer.