SYDNEY, AAP – Shares crashed to their second-steepest fall of the year on the ASX as higher than expected Australian inflation figures exacerbated fears of higher interest rates.

The market extended early losses on Tuesday after the annual inflation rate rose to 3.5 per cent, based on December quarter data.

Investors worry higher inflation will prompt the Reserve Bank to raise rates.

The benchmark S&P/ASX200 index closed down 177.9 points, or 2.49 per cent, to 6961.6 points.

The All Ordinaries index closed lower by 193.4 points, or 2.6 per cent, to 7248.1 points.


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Energy shares fared worst and fell about four per cent.

There were losses of about three per cent or more for shares in materials, technology and property.

The higher inflation figures prompted analysts to discuss the possibility of the Reserve Bank raising rates this year.

HSBC Australia chief economist Paul Bloxham said while core inflation met the RBA target, this was not the only measure the bank relied on.

“We expect the RBA to remain focused on its need for stronger wages growth before it would consider hiking,” he said.

The Reserve Bank has its first meeting of the year next week.

In the US, investors expect multiple rate rises this year.

They are preparing for the US central bank at its meeting this week to signal when the first hike may come.

Meanwhile, ASX traders have a day off on Wednesday for Australia Day and can consider the implications of the inflation data.

In share price news and moves, pay by instalments provider Zip is talking to rival Sezzle about buying the company.

Sezzle tailors its payments service to higher value purchases and collects fees from business and consumer users.

Both companies said the talks were preliminary.

Sezzle was up 9.81 per cent to $2.35.

Zip was down 2.13 per cent to $3.21.

Rio Tinto and its partners in Mongolia have agreed on terms to start work at a $US7 billion copper mine.

Production at the Oyu Tolgoi mine is expected to begin next year after government officials made changes to financial terms.

Rio Tinto was down 0.82 per cent to $107.08.

Fortescue Metals exported more iron ore in its second-quarter than at the same time a year earlier.

This made for record first-half exports.

Fortescue was lower by almost five per cent to $19.50.

BHP dropped 1.25 per cent to $45.03.

In banking, ANZ fared worst of the majors and lost 3.6 per cent to $26.77. The Commonwealth was best and shed about two per cent to $95.45.

Department store chain Myer said the coronavirus was affecting store sales this month and staff were focused on online sales.

Total sales for the five months to January 1 were up 12 per cent.

Myer gained 6.76 per cent to $3.95.

Miners trading in the west African nation of Burkina Faso tried to calm investors about the consequences of a military coup.

Mutinous soldiers have detained the democratically elected president and say they have suspended the constitution.

Perenti Global and West African Resources said their staff were safe and they continued to work as usual.

Perenti fell 10.65 per cent to 75 cents.

West African Resources slumped 16.86 per cent to $1.06.

The Australian dollar was buying 71.37 US cents at 1718 AEDT, lower from 71.77 US cents at Monday’s close.


* The benchmark S&P/ASX200 index closed down 177.9 points, or 2.49 per cent, to 6,961.6 points on Tuesday.

* The All Ordinaries index closed lower by 193.4 points, or 2.6 per cent, to 7,248.1 points.

* At 1718 AEDT, the SPI200 futures index was up 18 points, or 0.26 per cent, at 6,895 points.


One Australian dollar buys:

* 71.37 US cents, from 71.77 cents on Monday

* 81.27 Japanese yen, from 81.51 yen

* 63.15 Euro cents, from 63.26 cents

* 52.99 British pence, from 52.88 pence

* 106.98 NZ cents, from 106.99 cents.