The CPI print was a little stronger than expected. Headline moderated somewhat, but trimmed and weighted mean (which is more important) lifted.

For the most part, Australia has not felt the acute inflation pressures observed abroad, in the US, most particularly, but also in Europe and the UK (which is looking more stagflation-ary, due to BREXIT combining unfavourably with the pandemic related supply chain disruptions), and the RBA is more likely to view today’s print as moving inflation into the RBA’s target band of between 2-3%.

The dollar lifted, sharply, on the update, and settled higher. The dollar’s response, much more so than the direction of yields, gives the clue that the market anticipates tighter policy, over time, and certainly much tighter than the current guidance of the RBA itself.

From a stock and sector perspective, there was a less “definitive” market move. Many of today’s winners were cyclicals, equally, quite a few were defensives, and quite a few were secular growth stocks.

From our perspective, the ASX (the monopoly operator of the exchange) has had a good rally from the mid-high 60’s, and we are selling into strength, and buying some of the other pockets of latent value in the market.

The underperformers, tabled below, led at the sector level by stapes, were likewise made up of a somewhat unusual mix. Steel and iron ore prices remain volatile, and gold producer quarterlies continue to point to rising all-in-sustaining-costs, which reduce margins. Within staples, WOW and A2M milk were notable, see our earlier notes for more.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

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