ASX 200 Holds Near A$8,660 After April CPI Cools

The ASX 200 held near A$8,660 after the Australian Bureau of Statistics reported April consumer prices rose 4.2% year on year, down from 4.6% in March. On a monthly basis CPI slowed to 0.4% from 1.1% in March. The weighted mean CPI increased 3.5% and the trimmed mean rose 3.4%, both outside the Reserve Bank of Australia’s 3–4% target band.

Australia’s 10-year government bond yield fell to 4.86%, its lowest level since April 8, and the two-year yield dropped to 4.53%, the lowest since March 19 and below its year-to-date high of 4.919%. The index traded a few points below this week’s high of A$8,715 as markets factored in the inflation report and recent labor data.

A separate employment report last week showed the economy lost jobs and the unemployment rate rose in April. The RBA is due to meet on June 16; the central bank has raised rates three times earlier this year.

The ASX 200 is about 6.15% below its highest level this year. The index sits just below its 50-day and 100-day moving averages, which crossed in May. Traders are watching support near A$8,380 and resistance around A$9,083. The A$8,488 level is also being tracked for signs of further weakness.

Fuel and housing costs contributed to ongoing inflationary pressure. Fuel prices have risen since the conflict in the Middle East began several months ago, lifting global crude benchmarks; Brent and West Texas Intermediate have recorded double-digit gains over that period.

Some regional equity markets have diverged from Australia’s performance, with several Asian indices trading near record highs. Market participants are focused on upcoming releases for inflation and employment and on guidance from the RBA at its June 16 meeting when setting bond yields and equity positions.