Australian shares have dropped after official data showed inflation re-accelerating, raising the chances of an August rate rise.
The benchmark S&P/ASX200 index on Wednesday gave back roughly half of Tuesday's gains, finishing down 55.8 points, or 0.71 per cent, to 7,783, while the broader All Ordinaries dropped 54 points, or 0.67 per cent, to 8,022.9.
The ASX200 was already in the red but fell another 36 points in the space of two minutes after the late-morning inflation readout.
The Australian Bureau of Statistics reported consumer price rises rose four per cent in the year to May, up from 3.6 per cent in the 12 months to April, and the third-straight month that inflation has come in hotter than consensus expectations.
The Reserve Bank's preferred metric for measuring inflation, the trimmed mean CPI, rose for a fourth straight month, to 4.4 per cent, from 4.1 per cent in the year to April.
Betashares chief economist David Bassanese said the report could only be described as a shocker and would place huge pressure on the Reserve Bank to raise interest rates in August.
HSBC's economics team estimated there was a 30 per cent chance the Reserve Bank would raise rates in the second half, while Deutsche Bank changed its call and outright predicted an August rate hike following the readout.
Phil O'Donaghoe, Deutsche Bank's chief economist for Australia, described inflation here was "intolerably high," adding Australia was the only G10 country where underlying inflation has increased since December.
Eight of the ASX's 11 sectors finished lower, with tech, utilities and energy gaining ground.
The interest-rate-sensitive property sector was the biggest mover, dropping 2.1 per cent as Westfield owner Scentre Group fell 2.2 per cent and shopping centre operator GPT Group retreated 2.7 per cent.
The consumer discretionary sector fell 1.5 per cent, likely reflecting fears that another rate hike would further squeeze household spending.
Harvey Norman plunged 8.3 per cent to a five-month low of $4.20 in its worst losses for more than a year, while JB Hi-Fi retreated 2.6 per cent and Eagers Automotive dropped 4.7 per cent.
All of the Big Four banks finished in the red, with NAB dipping 1.1 per cent to $36.29, ANZ and CBA both down 1.3 per cent, to $28.45 and $126.90, respectively, and Westpac falling 0.6 per cent to $27.31.
The heavyweight mining sector ended 0.6 per cent lower, with BHP basically flat at $43.34, Fortescue edging 0.2 per cent lower at $21.63 and Rio Tinto dipping 0.4 per cent to $120.97
Goldminers suffered heavy losses as the precious metal changed hands for about $US2,320, down $US10 from Tuesday.
Northern Star dropped 3.4 per cent, Newmont fell 3.2 per cent and Evolution subtracted 3.1 per cent.
The Australian dollar rose to a two-week high following the inflation readout, buying 66.84 US cents, from 66.69 US cents at Tuesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Wednesday down 55.8 points, or 0.71 per cent, at 7,783.
* The broader All Ordinaries dropped 54 points, or 0.67 per cent, to 8,022.9.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.84 US cents, from 66.69 US cents at Tuesday's ASX close
* 106.83 Japanese yen, from 106.31 Japanese yen
* 62.48 euro cents, from 62.11 euro cents
* 52.70 British pence, from 52.55 pence
* 109.28 NZ cents, from 108.81 NZ cents.
