The Great Disconnect: ASX Surges Past 9,100 Even as Inflation Refuses to Budge

Key Highlights:

• ASX 200 jumps 1.08% to 9,119.8 despite 3.8% inflation
• Trimmed mean CPI rises to 3.4%, complicating RBA outlook
• Tech and Staples lead gains, Utilities and Discretionary lag
• WiseTech and Woolworths power rally on margin protection
• Economists flag possible May rate hike to 4.1%
  
   

Australian households are still grappling with higher grocery bills and power costs. Yet on Wednesday, the share market told a very different story.

The S&P/ASX 200 climbed 1.08 percent to 9,119.8 points, comfortably cracking the 9,100 milestone. The rally came just hours after fresh data from the Australian Bureau of Statistics confirmed that headline inflation held steady at 3.8 percent for the year to January. More concerning for policymakers, trimmed mean inflation, which strips out volatile items, edged up to 3.4 percent from 3.3 percent.

Normally, persistent inflation would dampen enthusiasm on the trading floor. Instead, buyers stepped in.

Source: MarketIndex 

Inflation vs the Index

The disconnect is striking. Electricity costs surged 32.2 percent as subsidies washed out. Housing costs rose 6.8 percent. Services inflation remains sticky.

Yet equities surged.

Part of the answer lies in global momentum. Wall Street rebounded overnight after a volatile week tied to trade tensions and renewed tariff rhetoric. The S&P 500 rose 0.77 percent and the Nasdaq added 1.04 percent, buoyed by renewed optimism in the technology sector.

Australia followed the lead.

The local All Technology index jumped 3.99 percent to 2,695.3. The broader risk-on mood overshadowed domestic inflation concerns.

The Efficiency Trade

The day’s most powerful symbol of the new market logic was WiseTech Global Ltd, which soared 9.37 percent.

The logistics software company reported a 36 percent drop in net profit, largely linked to its $3.2 billion acquisition of e2open. Under normal circumstances, that headline might unsettle investors.

Instead, markets focused on management’s decision to cut 2,000 jobs over 18 months and pivot to an AI-first engineering model. CEO Zubin Appoo declared that the era of manually writing code is ending, signalling a structural shift toward automation.

The market rewarded lower future labour costs more than it punished short-term earnings pressure.

It reflects a broader trend. In 2026, the equity market is prioritising productivity and margin protection over headcount growth.

Inflation-Proof Giants

Another major contributor to the rally was Woolworths Group Ltd, which surged 10.91 percent.

The supermarket giant posted a 16.4 percent jump in underlying profit to $859 million. Net profit fell sharply after a $701 million remediation payment to underpaid staff, but investors focused on what matters most in an inflationary environment: pricing power.

Sales growth of 3.4 percent demonstrated that essential retailers can pass on higher costs. For households, that may feel painful. For shareholders, it signals resilience.

Staples rose 4.78 percent as a sector.

The message is clear. Companies selling essentials continue to protect margins, even when consumers tighten belts elsewhere.

The Consumer Divide

Not every business is benefiting.

Domino’s Pizza Enterprises Ltd fell 15.23 percent after reporting a 2.5 percent decline in same-store sales. The company has moved away from blanket discounting, but in a high inflation environment discretionary spending is under pressure.

The contrast between supermarkets and pizza chains highlights a growing divide. Essential goods providers are holding firm. Discretionary brands are struggling to defend volumes.

This split was evident across sectors. Utilities fell 1.46 percent, weighed down by rate sensitivity. Consumer discretionary lost 1.22 percent.

Signals from Abroad

Australia is not trading in isolation.

In the United States, markets are navigating renewed tariff rhetoric following President Donald Trump’s announcement of a proposed 15 percent global import tariff. Yet technology stocks have regained footing as investors await NVIDIA’s earnings and the State of the Union address.

The so-called HALO trade, heavy assets with low obsolescence risk, has regained traction after earlier volatility.

Meanwhile, the Australian dollar strengthened to 70.8 US cents, reflecting expectations that the Reserve Bank of Australia may not be finished tightening policy.

The RBA Dilemma

Economists at Capital Economics and Commonwealth Bank now argue that a May rate hike to 4.1 percent remains firmly in play.

Trimmed mean inflation rising to 3.4 percent complicates the central bank’s path. Services inflation remains persistent, and housing cost growth continues to exert pressure.

Yet financial markets appear comfortable for now.

The ASX VIX index sits at 11.7, signalling low expected volatility over the next 30 days. Traders are effectively betting that rate risk is manageable in the near term.

Some in the market describe it as a buy now, reassess in May mindset.

A K-Shaped Reality

The divergence between consumer hardship and corporate strength is becoming more visible.

For households, inflation remains elevated. Mortgage stress and higher utility bills are tangible.

For listed companies, automation and pricing power are preserving margins. Cash flows remain solid across key sectors, and global liquidity is flowing back into equities after bouts of volatility in 2025.

The ASX’s move above 9,100 is not occurring despite inflation. In many cases, it is occurring because companies have adapted to it.

What Happens Next

The coming weeks will test the rally’s durability. If inflation fails to moderate further and the RBA signals a firmer tightening bias, sentiment could shift quickly.

For now, global tech momentum, strong earnings from defensive names and renewed appetite for risk are outweighing macro caution.

The disconnect may feel uncomfortable. But markets do not always mirror the lived economy in real time.

Sometimes they move ahead of it.