Index Update: The Australian sharemarket edged lower on Wednesday after inflation data came in above expectations, reinforcing market expectations that the Reserve Bank of Australia could lift interest rates at its meeting next week. The S&P/ASX 200 closed 7.70 points, or 0.09% lower, at 8,933.90. Despite the daily dip, the benchmark index remains on solid footing, up 1.72% over the past five sessions and sitting just 1.99% below its 52-week high. Sector performance was mixed but broadly weaker. Nine of the 11 sectors finished in the red, weighing on the overall index. Energy stood out as the top performer, rising 2.33% on the day and extending its five-day gain to 6.13%, supported by stronger commodity prices.

Macro Update: Australia’s Consumer Price Index (CPI) rose 3.8% in the 12 months to December 2025, according to the Australian Bureau of Statistics (ABS). This compares with the annual CPI inflation of 3.4% in November 2025. The largest contributor to annual inflation in December was Housing, which increased 5.5%. This was followed by Food and non-alcoholic beverages, up 3.4%, and Recreation and culture, which rose 4.4% over the year.

Trimmed mean inflation increased to 3.3% in the 12 months to December 2025, up from 3.2% in the 12 months to November 2025. Annual goods inflation rose 3.4% in the 12 months to December, compared with 3.3% to November, with Electricity the main contributor, rising 21.5% over the year. Annual services inflation increased to 4.1% in the 12 months to December, up from 3.6% to November. The main contributors were Domestic holiday travel and accommodation (+9.6%) and Rents (+3.9%).

Top Market Movers: The ASX session on Wednesday saw Deep Yellow Limited (ASX:DYL) leading gainers, jumping 10.683% to AUD 2.590, followed by Silex Systems Limited (ASX:SLX) up 7.412% to AUD 7.680 and Paladin Energy Ltd (ASX:PDN) rising 5.366% to AUD 13.940 on continued uranium sector strength, while declines were led by Life360 Inc. (ASX:360), which fell 7.613% to AUD 28.520, alongside Catapult Sports Ltd (ASX:CAT) down 6.836% to AUD 3.680 and Temple & Webster Group Ltd (ASX:TPW) slipping 6.623% to AUD 12.830 amid broader weakness in technology and consumer discretionary stocks.

Commodity Update: The U.S. dollar hovered near four-year lows on Wednesday, facing a growing crisis of confidence after President Donald Trump downplayed its recent weakness, which accelerated selling pressure and boosted the yen, euro, and sterling. Gold surged 3.07% to USD 5,277.10, silver jumped 8.69% to USD 115.12, and copper rose 1.35% to USD 13,205.40. Brent crude gained 0.10% to USD 67.66, supported by tighter U.S. supplies amid extreme cold.

Our Stance: Australian equities edged modestly lower as hotter-than-expected inflation data reinforced expectations of a near-term RBA rate hike, with the S&P/ASX 200 slipping 0.09% to 8,933.9 despite remaining close to record highs. Broad sector weakness offset strength in energy stocks, which rallied on firmer commodity prices. Inflation pressures intensified, led by housing, utilities, and services, underscoring the persistence of cost pressures across the economy. Uranium stocks outperformed sharply, while technology and consumer discretionary names lagged. Overall, market resilience remains evident, but elevated inflation suggests near-term volatility may persist before clearer policy direction emerges.

In its latest session, the S&P/ASX 200 Index declined 7.70 points, forming a small bearish candlestick on rising trading volume a combination that signals increased investor caution and reinforces the prevailing short-term bearish tone. On the daily chart, the index continues to trade below its 50-period Simple Moving Average (SMA), which remains a key zone of immediate resistance. Immediate support is located near 8,860.70, and holding above this level will be critical for stabilising recent price action and restoring near-term confidence. From a broader weekly perspective, however, the index continues to trade above its 50-period SMA, a constructive long-term signal that points to the potential for renewed upside momentum once short-term selling pressure begins to ease.