The Australian equity market closed higher on Friday, with the S&P/ASX 200 index advancing 35.3 points, or 0.41%, to settle at 8,657. This modest gain contributed to a 0.3% weekly increase, following a volatile period that saw the index dip to a seven-week low earlier in the session. The broader All Ordinaries index also rose 0.41%, finishing at 8,877.2.
Inflation Data in Focus
Market attention now turns to Wednesday's release of April consumer price index (CPI) data, which is expected to be a pivotal factor for the Reserve Bank of Australia's (RBA) monetary policy outlook. The RBA raised its cash rate by 25 basis points to 4.35% on May 5, citing persistent inflationary pressures from higher fuel and commodity prices linked to geopolitical tensions and evidence of cost pass-through by businesses. A strong CPI reading could reignite expectations of further rate hikes, while softer data may provide some relief.
Recent labor market figures have offered some respite. The Australian Bureau of Statistics reported a decline of 18,600 in employment for April, with the unemployment rate rising to 4.5% from 4.3%. HSBC Australia chief economist Paul Bloxham described the data as "fairly decisive" and expects the RBA to maintain its current stance "for some time." This has helped alleviate immediate rate-hike fears, particularly for interest rate-sensitive sectors.
Sector Performance
Materials led the sector gains on Friday, rising 1%, according to data from ABC News. Mining and energy stocks were notably stronger, with BHP, Evolution Mining, and South32 providing key support to the index. Industrials and energy also posted gains. In contrast, telecommunications, utilities, and consumer discretionary sectors declined. Guzman y Gomez surged 9.6% after announcing its decision to exit the U.S. market by closing its Chicago locations.
Inflation and Economic Context
March CPI data showed an annual increase of 4.6%, up from 3.7% in February, driven by housing, transport, and food costs. The trimmed mean inflation rate held steady at 3.3%. Westpac economist Neha Sharma forecasts April headline CPI to rise 0.9% month-over-month and 4.8% year-over-year, noting "signs of emerging pass-through" from higher costs, including fuel surcharges and price increases for construction materials.
Global markets also remain a focus. The U.S. core personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation measure, is due Thursday night Sydney time, alongside U.S. GDP, durable goods orders, and jobless claims. China's official manufacturing PMI, released next Sunday, will be closely watched for its impact on Australian mining stocks.
Market Outlook
Wall Street provided a positive lead, with the Dow Jones Industrial Average closing at a record high on Friday and the S&P 500 notching its eighth consecutive weekly gain. U.S. 10-year Treasury yields fell to 4.558%. However, analysts caution that the market setup remains fragile. A stronger-than-expected Australian CPI could revive rate-hike risks, putting pressure on banks, property, and retail stocks. Additionally, any spike in oil prices or bond yields could disrupt the current rally, with ongoing concerns about the U.S.-Israeli conflict with Iran potentially disrupting energy supplies and driving core prices higher.
The Australian dollar was trading at 71.36 U.S. cents late Friday. The cash market is closed for the weekend, with regular ASX trading resuming Monday at 10:00 a.m. Sydney time.
