Aust shares spike on inflation surprise

The local share market has bounced back from early losses to hit a fresh six-month high on signs inflation is finally peaking.

The benchmark S&P/ASX200 index had been down by as much as 0.4 per cent on Wednesday morning but quickly gained ground after the Australian Bureau of Statistics reported that consumer prices rose less than expected last month.

The index finished up 30.9 points, or 0.43 per cent, to 7284.2, while the broader All Ordinaries gained 38.7 points, or 0.52 per cent, to 7480.7.

For the month the ASX200 rose 420.7 points, or 6.1 per cent, narrowly beating October as the index's second-best month of the year. It gained 6.4 per cent in March.

Wednesday's gains came after the ABS reported that consumer prices rose 6.9 per cent in the 12 months to October, down from 7.3 per cent in the year to September. Analysts had expected a 7.6 per cent rise for October.

"So this is good - good news for the Aussie share market, which is why we're just four per cent away from the highest level that the Aussie share market has ever been," said Saxo Markets Australian market analyst Jessica Amir.

"The market is thinking, forward looking ahead, that the Reserve Bank of Australia could possibly pause on rate hikes sooner than expected," Ms Amir said.

ANZ economists Catherine Birch and Felicity Emmett said that the data would likely see the Reserve Bank consider the possibility of a pause in its rate hike campaign when the central bank means on Tuesday.

But "given the natural pause in January when the board doesn't meet, we expect another 25bp (basis point interest rate hike) at next week's meeting," they wrote in a research note.

Still, given Wednesday's data, the market now expects a rate cut by the end of 2023, Ms Amir said.

"And on top of that, we are getting some type of good news that China may potentially step in and ease some (COVID) restrictions, so that is supporting miners as well," Ms Amir said.

The mining sector finished up 1.3 per cent, with BHP gaining 1.6 per cent to $45.52 and Rio Tinto rising 1.7 per cent to $109.62, although Fortescue dropped 0.4 per cent to $19.38.

"Australia is expected to ramp up exports of coal and LNG, because we're probably going to have another freezing cold winter in the Northern Hemisphere," Ms Amir said.

Woodside, which delivered its first LNG cargo to Europe since the 1990s on Sunday, climbed 1.3 per cent to $37.29.

The big banks all lost ground, with ANZ dropping 0.7 per cent to $24.74, NAB falling 0.5 per cent to $31.54, Westpac dipping 0.3 per cent to $23.77 and CBA down 0.2 per cent to $107.76.

Insurance companies QBE and Suncorp both dipped by 0.7 per cent while IAG fell 0.4 per cent.

Furniture retailer Temple & Webster soared 14.1 per cent to a two-week high of $5.27 after chief executive Mark Coulter told shareholders at its annual general meeting that sales in November had been running slightly ahead of the same month a year ago.

The Australian dollar was buying 67.00 US cents, from 66.58 US cents at Tuesday's ASX close.

ON THE ASX:

* The benchmark S&P/ASX200 index on Wednesday gained 30.9 points, or 0.43 per cent, at 7284.2

* The broader All Ordinaries rose 38.7 points, or 0.52 per cent, to 7480.7

CURRENCY SNAPSHOT:

One Australian dollar buys:

* 67.00 US cents, from 67.04 US cents at Tuesday's close

* 92.76 Japanese yen, from 92.86 Japanese yen

* 64.74 Euro cents, from 64.55 Euro cents

* 55.93 British pence, from 55.48 British pence

* 107.64 NZ cents, from 107.68 NZ cents.