The Australian sharemarket edged higher on Wednesday as investors assessed a mixed inflation report that showed headline price growth easing more than expected while underlying inflation accelerated, reinforcing expectations that the Reserve Bank of Australia may need to raise interest rates again.
The S&P/ASX 200 Index rose 21.4 points, or 0.2%, to close at 8,808.4, with nine of the 11 sectors finishing in positive territory.
Data released during the session showed headline inflation slowed to 4.0% in the 12 months to May, below market expectations of 4.4% and down from 4.2% in April.
However, trimmed mean inflation, the RBA's preferred measure of underlying price pressures, accelerated to 3.6% from 3.4% in the previous month and exceeded forecasts of 3.5%.
Westpac economists Neha Sharma and Sian Fenner noted:
"The May trimmed mean inflation outcome was in line with our expectations and is on track to rise 1.0% in Q2, taking annual trimmed mean inflation to 3.8%yr. As such, we retain our view that further cash rate increases are coming, with the next hike likely at the August meeting.
"Even with oil prices off their highs, and other commodity prices easing to a lesser extent, we expect further pass-through from still elevated fuel and commodity costs over coming months.
"This is likely to keep inflation uncomfortably high for the RBA which will be concerned that high inflation is becoming embedded in domestic wage and price setting behaviour. The larger than expected increase in new dwelling inflation, which has already been singled out as a risk, will be particularly unsettling."
The Information Technology sector led gains after suffering heavy losses over the previous two sessions.
Xero surged 8.2%, WiseTech Global rebounded 14.3%, TechnologyOne gained 2.5%, and Life360 rose 3.4%.
Healthcare stocks also attracted buyers, with CSL advancing 2.6%, Ramsay Health Care climbing 3.5%, ResMed adding 3.3%, and Pro Medicus rising 3.5%.
The Financial sector gained overall, with major banks finishing mostly in the green. Commonwealth Bank gained 0.4%, National Australia Bank rose 1.1%, and Westpac added 0.9%, while ANZ slipped 0.3%.
Energy stocks weakened as oil prices extended recent declines. Woodside Energy fell 1.4%, Santos lost 1.0%, Beach Energy dropped 8.5%, and Viva Energy declined 2.4%.
The materials sector also finished lower, weighed down by weakness among major miners and gold producers. BHP lost 0.7%, Rio Tinto fell 1.2%, and Fortescue eased 0.1%.
Gold miners tracked softer bullion prices, with Northern Star Resources slipping 0.2%, Evolution Mining falling 2.3%, and Newmont ending 2.2% lower.
Among individual companies, Baby Bunting plunged 10.6% after the infant products retailer downgraded its second-half profit guidance, citing softer fourth-quarter trading conditions and weak consumer spending.
KMD Brands fell 4.6% after announcing plans to consolidate its shares as part of an effort to rationalise the number of ordinary shares on issue, with the changes due to take effect from 1 July.
Separately, the company announced the appointment of John Strowger as a non-executive director from 1 July, replacing David Kirk.
On the bond markets, the Australian 10-year government bond yield fell 0.4% to 4.77%, while the two-year yield rose 0.2% to 4.46%.
