Real estate investment trusts (REITS) were the weakest of the sectors that make up the benchmark S&P/ASX 200, with shares of all large-cap companies in the sector trading in negative territory. Scentre lost 3 per cent and Stockland slid 2.5 per cent, while Goodman Group shed 0.8 per cent.

Consumer discretionary firms (down 1 per cent) and the healthcare sector (down 0.9 per cent) were also weaker, with shares of Sonic Healthcare down 4 per cent, Ramsay Healthcare down 3 per cent and Wesfarmers down 1.1 per cent.

Cleanaway Waste Management (down 3.7 per cent), TechnologyOne (down 3.8 per cent) and Meridian Energy (down 3.2 per cent) were among the biggest large-cap decliners. All four of the big banks, including the country’s biggest bank CBA (down 1.2 per cent), dipped. They were a major drag on the S&P/ASX 200.

The lowdown

VanEck head of investments and capital markets Russel Chesler said there was a high probability Australia could follow a similar inflation path to the US, where inflation data came in hotter than expected for a third consecutive month.

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“We are still seeing strong price pressure in house prices, rents and insurance,” he said, “The recent fall in local inflation has been driven by softer goods prices, whereas services inflation, which is driven by wages growth remains high. The shock fall in Australian unemployment from 4.1 per cent to 3.7 per cent will stop wage inflation from falling any time soon.”

The local bourse tumbled at the open following the inflation surprise in the US before miners and energy companies helped to pare back the early losses.

On Wall Street, the economic data sparked a major market sell-off, as worries rose that what seemed like a blip in the battle to bring down inflation was fast turning into a troubling trend.

The S&P 500 Index dropped 0.9 per cent, as the vast majority of stocks that comprise the benchmark fell. The Dow Jones Industrial Average tumbled 1.1 per cent, while the technology-heavy Nasdaq Composite Index was a little more resilient, dipping 0.8 per cent.

Treasury yields leaped in the bond market, raising downward pressure on the stocks, after a report showed inflation was more than economists expected last month.

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“Two data points don’t make a trend, but maybe three do,” said Brian Jacobsen, chief economist at Annex Wealth Management. “If we get one more reading like this, Fed chatter will shift from when to cut to whether to hike.”

Prices for everything from bonds to gold fell immediately after the release of the inflation data.

The yield on the 10-year Treasury jumped to 4.54 per cent from 4.36 per cent and is now back to where it was in November. The two-year yield, which moves more on expectations for Fed action, shot even higher to 4.97 per cent, from 4.74 per cent.

Some traders now believe the Fed may cut rates only twice this year, after earlier expectations of six or more cuts through 2024 at the start of the year.

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