The Australian share market has slipped slightly in another session of mostly directionless trading before another US inflation readout likely to drive the pace of interest rate cuts.
The benchmark S&P/ASX200 index on Tuesday finished down 23.2 points, or 0.3 per cent, to 7,726.8, while the broader All Ordinaries fell 23.7 points, or 0.3 per cent, to 7,995.7.
Westpac senior economist Pat Bustamante said markets were in a holding pattern as traders braced for Wednesday night's US consumer price index report to see if inflation had continued to fall as forecast.
Expectations for quick rate cuts in 2024 have been pushed back, creating a headwind for equities, after the first three CPI reports of the year came in higher than expected.
JP Morgan analyst Federico Manicardi predicted that an in-line print would mean that equities would continue to rally, while a hotter-than-expected readout could lead to some weakness in shares given their recent rebound.
The federal budget will be unveiled Tuesday evening by Treasurer Jim Chalmers, and while it's not usually a market mover, IG analyst Tony Sycamore said there are concerns that this time it might contribute to Australia's inflation problem.
HSBC chief economist Paul Bloxham said subsidies in the budget for things such as rent and energy bills could boost household disposable income, driving up spending and thus increasing core inflation.
Eight of the ASX's 11 sectors closed in the red on Tuesday, while utilities closed flat and consumer discretionary and health care finished in the green.
Industrials and property were the biggest movers, both falling 0.9 per cent, as Seven Group dropped 3.1 per cent and Dexus fell 1.1 per cent.
Insurance companies - whose bottom lines are generally hurt by lower interest rates - had a down day, with IAG, Suncorp and QBE dropping 1.3 per cent.
Elsewhere in the financial sector, the big four banks were mixed. CBA finished up 0.2 per cent to $119.33, while NAB added 0.2 per cent to $33.99, ANZ dropped 0.7 per cent to $28.01 and Westpac dipped 0.3 per cent to $26.60.
In the heavyweight mining sector, BHP edged 0.2 per cent lower to $43.22 after Anglo American rejected a second tentative takeover offer of $64 billion for the global miner.
BHP chief executive Mike Henry said it was disappointing, calling the companies a strategic fit whose combination would be unique and compelling.
Few expect this is the end of the high-stakes deal-making, however.
Under UK takeover rules, BHP has until May 22 to make a binding offer or walk away from the transaction.
Elsewhere in the sector, Fortescue fell 0.9 per cent to $25.81, Rio Tinto dropped 0.7 per cent to $128.12 and goldminer Northern Star retreated 1.2 per cent to $14.57.
The Australian dollar was buying 66.05 US cents, from 65.98 US cents at Monday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index on Tuesday closed down 23.2 points, or 0.3 per cent, at 7,726.8
* The broader All Ordinaries dropped 23.7 points, or 0.3 per cent, to 7,995.7.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.05 US cents, from 65.98 US cents at Monday's ASX close
* 103.31 Japanese yen, from 102.81 Japanese yen
* 61.21 Euro cents, from 61.26 Euro cents
* 52.62 British pence, from 52.67 pence
* 109.64 NZ cents, from 109.80 NZ cents.
