ASX 200 Jumps Nearly 1% as Codan Soars, Northern Star Surges and Inflation Hits 4% Before RBA's Next Move

SYDNEY — Australian shares climbed nearly 1% by midday Wednesday, brushing aside a jump in inflation as defense technology, gold and property stocks rallied a day after the Reserve Bank of Australia lifted interest rates to their highest level in 15 years.

The benchmark S&P/ASX 200 index was up 86 points, or 0.99%, at 8,795.3 as of 12:42 p.m. AEST, putting it on course for a second straight gain. The index had closed Tuesday up 29.6 points, or 0.34%, at 8,709.3. The morning advance also pulled the market back into positive territory for 2026, with the ASX 200 returning to gains for the year as rate-sensitive stocks bounced.

The rally came despite a subdued lead from overseas. SPI futures had pointed to a 5-point decline at the open after the Dow Jones fell 0.25%, the S&P 500 slipped 0.15% and the Nasdaq eased 0.1%.

Inflation climbs to 4%

Investors digested fresh consumer price data released at 11:30 a.m. Australia's annual inflation rate rose to 4.0% in August from 3.5% in July, according to the Australian Bureau of Statistics. Prices rose 0.4% for the month, slowing from July's 1.0% increase and matching market expectations. The trimmed mean measure, a gauge of underlying inflation closely watched by the central bank, rose 0.2% in the month and 3.6% from a year earlier.

ABS head of price statistics Rachael McCririck said housing was the biggest driver of annual inflation in August, with housing costs up 5.7%. Fuel costs also added pressure, as the Middle East conflict continues to keep energy prices elevated.

The reading remains well above the RBA's 2% to 3% target band. The Australian dollar drew some selling after the data was released.

Because the result largely matched forecasts, traders appeared to view it as unlikely to force the central bank's hand in the near term.

RBA signals patience after fourth hike

The inflation figures landed a day after the Reserve Bank raised its cash rate. The central bank lifted the rate to 4.6%, a 15-year high, in its fourth increase of the year.

RBA Governor Michele Bullock signaled on Tuesday that the bank was in no hurry to raise rates again at its Nov. 3 meeting, which falls on Melbourne Cup Day. "The point I want to make is that we've got to see how these four interest rate rises feed through," Bullock told reporters.

That message has flowed through to bond markets. Australia's three-year government bond yield, which is sensitive to rate expectations, eased to 4.88%, down 17 basis points since the RBA decision and its lowest level since Sept. 9.

Property and tech lead sector gains

The pullback in yields lifted sectors hit hardest by rising borrowing costs. Real estate stocks rebounded strongly from a near three-year low, while telecommunications shares bounced off a two-year low.

The technology sector has risen almost 6% over two sessions, largely on the back of Codan's 31% surge over the same period, which has made it the market's biggest tech stock.

Codan shares rose another 6.1% to 68.35 Australian dollars on Wednesday after a 24% rally on Tuesday, taking their year-to-date gain to 141%. The communications and metal detection company on Tuesday raised its fiscal 2027 outlook, citing exceptional demand for its unmanned systems communications technology, and said first-half net profit would more than double. Codan now expects first-half net profit of at least 160 million Australian dollars, up at least 125% from a year earlier.

Other defense-linked names also advanced. DroneShield gained 7.6% after its U.S. subsidiary secured a place on a three-year counter-drone procurement contract with a ceiling of $500 million under the Domestic Shield program. The company cautioned that the contract does not guarantee orders and that it cannot yet quantify any amounts. Shipbuilder Austal rose 7.1%.

Northern Star jumps on takeover report

Gold miner Northern Star Resources was among the biggest movers. Its shares rose about 7.5% to 25.05 Australian dollars after reports that South Africa's Gold Fields is considering increasing the cash portion of its takeover proposal, which Northern Star rejected on Monday. The talks are at an early stage and there is no certainty a revised offer will be made.

Gold Fields' initial cash-and-share offer valued Northern Star at 38.7 billion Australian dollars ($27.1 billion), which it described as a 22% premium. Northern Star said the proposal did not reflect the underlying value of its assets and growth prospects. A merged company would produce about 4.1 million ounces of gold a year, making it the world's second-largest gold producer.

Gold stocks more broadly had been expected to benefit after the precious metal's price rose overnight.

Black Cat, Pinnacle slide

On the downside, Black Cat Syndicate plunged 18.5% after its fiscal 2027 guidance pointed to higher costs in the first half as its Kal East mines ramp up. The gold miner forecast all-in sustaining costs of 3,500 to 3,900 Australian dollars per ounce and production of 80,000 to 90,000 ounces, weighted to the second half. The stock fell to its lowest level since July 2025 and is down 37% this year.

Pinnacle Investment Management fell 3.8% to 13.42 Australian dollars, extending volatile trading tied to its exposure to Metrics Credit Partners. Auditor KPMG has told Metrics it cannot deliver an audit opinion on three of its ASX-listed funds' fiscal 2026 accounts by the Sept. 30 deadline, and no new date has been set. Unit pricing, applications and redemptions in the underlying funds have been suspended, and the listed funds will remain halted until audited accounts are lodged. Pinnacle owns about 35% of Metrics Credit Holdings.

Lithium developer IperionX fell 6.7%, while 4DMedical dropped 3.9%.

Energy under pressure as oil slides

Energy producers including Santos and Beach Energy were expected to struggle after oil prices fell overnight. Brent crude dropped 2.6% to $102.59 a barrel as Middle East crude exports recovered to 16.3 million barrels a day in September, the highest since the war began in late February, according to Kpler. Saudi Arabia resumed tanker loadings at its Red Sea port of Yanbu after restarting its East-West Pipeline.

Global backdrop remains shaky

Overseas, bond markets remained a key source of concern. The U.S. 30-year Treasury yield topped 5.61% during the session, its highest level since June 2002, before easing back below 5.6%.

New York Federal Reserve President John Williams said "one further upward adjustment" to U.S. rates may be appropriate late this year, pushing back against expectations of an October move. Following his remarks, futures markets cut the odds of an October hike to about 50% from 70%.

U.S. consumer confidence fell 6.7 points to 81.9, its lowest reading since 2014 and well below forecasts, as fuel costs weighed on household sentiment.

With the ASX 200 closing in on the 8,800 mark, investors will turn to further domestic data and the next inflation update. Traders are awaiting trade and private sector credit figures later this week, along with September manufacturing readings from China, Australia's top trading partner. The September consumer price index is scheduled for release on Oct. 28, less than a week before the RBA's next policy meeting.