ASX Slips as Inflation Shock Lifts Rate Hike Odds, Gold Shines While Financials Fade

Key Highlights

• ASX 200 edged lower as hotter-than-expected inflation reshaped rate expectations.
• Economists now widely expect a February interest rate hike from the RBA.
• Gold prices surged past US$5,200, lifting precious metals stocks.
• Resources and defensives outperformed while financials and consumer names lagged.
• Wall Street delivered mixed signals overnight as policy uncertainty deepened.
   

Australian shares eased on Wednesday as an unexpected jump in inflation rekindled fears that interest rates are heading higher sooner than many had anticipated. The shift in expectations set the tone for a cautious session, marked by sharp sector rotation rather than broad-based selling.

By early afternoon, the S&P/ASX 200 was down around 0.2 percent, trading near 8,924 points, as markets digested new data showing inflation is proving more persistent than forecast. According to the Australian Bureau of Statistics, headline CPI rose 3.8 percent in the year to December, up from 3.4 percent in November, while the trimmed mean, the Reserve Bank’s preferred measure, lifted to 3.3 percent. 

Source ABS via live market updates.

The inflation surprise immediately shifted focus to the Reserve Bank of Australia’s first policy meeting of 2026 next week. The Australian dollar, which had touched three-year highs earlier in the day, retreated below 70 US cents, reflecting renewed caution in currency markets.

Economists Turn More Hawkish on Rates

Following the CPI release, economists wasted little time revising their outlooks.

Westpac chief economist Luci Ellis described the December inflation outcome as decisive, writing that inflation had effectively “cast the deciding vote” for a rate hike. Westpac now expects a 25 basis point increase at next week’s RBA meeting, describing it as a likely “one-and-done” move rather than the start of an aggressive tightening cycle.

At ANZ, head of Australian economics Adam Boyton echoed that view, saying the bank now expects the RBA to lift rates by 25 basis points in early February, but stressed it may be a single, precautionary step rather than a series.

Others were less convinced the tightening would stop there. Betashares chief economist David Bassanese argued that inflation pressures remain too strong for the RBA to ignore, suggesting at least one, and possibly two, rate hikes in the first half of 2026 if price pressures persist.

Meanwhile, Capital Economics senior APAC economist Abhijit Surya said the inflation data made a rate rise “all but certain”, noting that underlying price pressures are building against a backdrop of strong household spending, rising business investment and a tightening labour market.

Sector Performance Reveals Clear Market Preferences

Despite the modest fall in the headline index, Wednesday’s session revealed clear winners and losers as traders repositioned around inflation and interest rate risks.

Top Performers: Gold and Resources Take the Lead

Rising inflation expectations helped push spot gold up 0.6 percent to above US$5,220 an ounce, triggering strong gains across the precious metals space.

Gold producers and explorers were among the standout performers, benefiting from renewed safe-haven demand as real interest rates adjusted and currency volatility increased.

The broader resources sector also found support, even as iron ore prices dipped slightly. The market appeared willing to look through short-term softness in bulk commodities, focusing instead on longer-term demand and inflation protection.

Top Performers: Miners Dominate as Metals Catch a Bid

Wednesday’s session was clearly led by the resources sector, with miners across uranium, gold, rare earths and base metals attracting strong buying interest as inflation uncertainty pushed capital toward hard assets.

BENZ Mining Corp (BNZ) topped the market, surging 21.3 percent to $2.73, as interest continued to build around its gold exploration exposure amid record bullion prices.

Uranium names were also firmly in focus. Bannerman Energy (BMN) climbed 17.7 percent to $4.76, while Boss Energy (BOE) gained 9.7 percent to $1.98 and Deep Yellow (DYL) added 8.6 percent to $2.54, reflecting renewed optimism around nuclear fuel demand and long-term supply constraints.

Gold and critical minerals stocks featured heavily across the leaderboard. Antipa Minerals (AZY) rose 11.6 percent, EQ Resources (EQR) advanced 11.4 percent, and Challenger Gold (CEL) gained 8.8 percent, as investors continued to rotate into commodities viewed as inflation hedges.

Rare earths exposure also drew attention, with Brazilian Rare Earths (BRE) up 7.9 percent, while Silex Systems (SLX) added 7.6 percent, benefiting from ongoing interest in strategic materials tied to energy transition and defence supply chains.

Sunshine Metals (SHN) also stood out during the session, extending recent gains and trading at $0.04, marking a 36 percent rise on the day on heavy volume. The move reinforced strong speculative interest in junior gold explorers, particularly those leveraged to Queensland assets, as gold prices pushed to fresh record highs. 

Source ASX market data.

Other notable gainers included Horizon Minerals (HRZ), Santana Minerals (SMI), Focus Minerals (FML) and 29Metals (29M), underlining the breadth of buying across the mining complex.

Laggards: Lithium, Tech and Consumer Names Under Pressure

On the downside, losses were concentrated in lithium, technology and select consumer-facing stocks, as higher interest rate expectations weighed on growth-sensitive sectors.

Elevra Lithium (ELV) led the declines, falling 13.5 percent to $7.92, as lithium stocks broadly retreated amid ongoing concerns about pricing volatility and near-term demand uncertainty.

Resource names were not immune to selling pressure. Dateline Resources (DTR) dropped 10.4 percent, while Prospect Resources (PSC) slipped 7.4 percent, reflecting stock-specific weakness rather than a broad sell-off across the sector.

Technology stocks were among the session’s clear laggards. Fineos Corporation (FCL) fell 9.5 percent, Weebit Nano (WBT) slid 7.0 percent, and Catapult Sports (CAT) dropped 6.8 percent, as higher bond yields continued to pressure valuations across the growth space.

Consumer and platform-based stocks also lost ground. Life360 (360) retreated 7.3 percent to $28.63, giving back some recent gains after its strong rally earlier in the month.

In energy materials, Syrah Resources (SYR) declined 6.9 percent, extending weakness following recent uncertainty around the timing and structure of its Tesla graphite offtake arrangements.

Other notable fallers included Calix (CXL), 4DMedical (4DX), Bravura Solutions (BVS) and Oneview Healthcare (ONE), highlighting a broad pullback in mid-cap growth names.

Global Markets Offer Mixed Signals

Overnight, offshore markets provided no clear lead.

In the United States, the Dow Jones fell around 0.8 percent, while the S&P 500 gained 0.4 percent and the Nasdaq rose 0.9 percent, highlighting divergent views on growth, inflation and technology earnings.

European markets were firmer, with the FTSE and Stoxx 600 both up about 0.6 percent, although Germany’s DAX slipped slightly. Asian markets were cautious ahead of upcoming central bank decisions, particularly in Japan, where policymakers are under pressure to respond to stubborn inflation without derailing growth.

Commodities, Currencies and Crypto Add Context

Beyond equities, other asset classes reinforced the day’s cautious tone.

• Gold and silver advanced as inflation uncertainty revived demand for hard assets.
• Oil prices edged higher, though remained range-bound.
• Iron ore slipped modestly, reflecting softer short-term demand signals.
• Bitcoin traded slightly higher near US$89,300, continuing to move independently of traditional risk assets.
• The Australian dollar eased after earlier strength, highlighting sensitivity to interest rate expectations.
  
   

Inflation remains higher than the Reserve Bank would like. When prices rise faster than expected, central banks often respond by raising interest rates to slow spending and cool the economy.

Higher interest rates tend to hurt sectors that rely on borrowing or consumer spending, such as banks, retailers and property. At the same time, assets like gold can benefit because they are seen as a store of value during inflationary periods.

That dynamic played out clearly today, with money flowing out of rate-sensitive stocks and into commodities and defensives.

Looking Ahead: All Eyes on the RBA

With the Reserve Bank meeting just days away, markets are likely to remain volatile. Economists are now largely aligned around a February rate hike, though debate continues about whether it will be a single move or part of a broader tightening phase.

Much will depend on how policymakers interpret the inflation data and whether they believe price pressures will ease naturally over the course of 2026.

Until then, expect continued sector rotation rather than broad market moves, as traders position for different policy outcomes.

For now, Wednesday’s session served as a reminder that inflation remains the key story shaping markets, both in Australia and globally.