Utilities (down 1.1 per cent) also fell as Meridian Energy (down 1.5 per cent), APA (down 1.6 per cent) and Infratil (down 2.3 per cent) lost ground.

The lowdown

GSFM investment strategist Stephen Miller said Australian investors were more cautious than their Wall Street counterparts following the release of the latest inflation data.

“For reasons that aren’t immediately clear, the US bond market rallied quite hard and their bond market took the number quite positively, with investors expecting policy rate cuts in the second half of the year,” Miller said. “The Australian market was more reticent of pricing in interest rate cuts from the Reserve Bank after the US consumer price index number came out.”

Miller said the Australian bond market was less optimistic and its subdued reaction domestically was possibly “a bit of a reaction to the budget”, which, despite posting a surplus, could stoke some inflationary pressure.

“At the margin, interest rates may stay higher for a little longer because of the budget,” he said.

The real estate sector (up 0.1 per cent) lifted slightly after industrial property giant Goodman reported strong demand for its warehouses in the past three months, with shares up 0.9 per cent after the company said it expected continued high demand for industrial property. However, it was weighed by firms including shopping centre landlord Scentre which fell 0.4 per cent despite reporting a 13.7 per cent rise in visitors to its Westfield malls in the first 17 weeks of the year.

Mixed session on Wall Street

The lukewarm start to the trading day on the Australian bourse came after a mixed session on Wall Street following a US government report that showed inflation is making strides towards easing in the world’s largest economy, even if it remains too high.

The S&P 500 rose 0.4 per cent after swinging between gains and losses through the day. The Dow Jones Industrial Average slipped 0.1 per cent, while the Nasdaq composite rallied 1 per cent.

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Bond prices climbed after the highly anticipated report said inflation at the consumer level was down to 4.9 per cent last month, its lowest level in two years. That was slightly better than economists expected, and other underlying measures of inflation also came in close to forecasts.

Because of that, Wall Street still sees the door open for the Federal Reserve to leave interest rates alone at its next meeting in June. That would be the first time it hasn’t raised rates at a meeting in more than a year, and would offer breathing room for the economy and financial markets.

Following the report, traders upped the probability they see of the Fed holding rates steady in June to nearly 94 per cent, according to data from CME Group.

Stocks that benefit the most from an easing of interest rates led the way on Wall Street, including big tech and other high-growth stocks. Amazon’s 3.3 per cent rise and Microsoft’s 1.7 per cent climb were the two biggest forces pushing the S&P 500 higher.

Other economic reports will arrive before the Fed’s next meeting in mid-June that will sway its decision. Inflation still remains way above the Fed’s 2 per cent target and continues to squeeze households across America, particularly those with the lowest incomes.

On the losing end of Wall Street, Airbnb slumped 10.9 per cent despite reporting profit that matched analysts’ forecasts. It gave financial forecasts for the current quarter that were weaker than some on Wall Street expected.

Icahn Enterprises, the partnership run by high-profile activist investor Carl Icahn, sank 15.1 per cent after disclosing that federal prosecutors asked for information related to its corporate governance and other matters.

The request from the US Attorney’s office for the Southern District of New York came a day after a short-selling research firm, Hindenburg Research, accused Icahn Enterprises of inflating the value of some of its investments. Icahn dismissed the accusations as misleading and self-serving.

Besides worries about interest rates and inflation, some corners of the bond market are also swinging on concerns about the US government inching closer to a possible default on its debt. That’s never happened before, and economists warn a default could be catastrophic for the economy and financial markets.

The widespread expectation is that Congress will come to a deal before the June 1 deadline that many on Wall Street have circled, simply because the alternative would be so painful for everyone. But a meeting in the White House on Tuesday between political leaders yielded no breakthrough, and sniping continues.

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“Peter John Collins was found to have breached multiple confidentiality agreements with Treasury, which had provisions where a breach of it was reportable under the Crimes Act,” senator Deborah O’Neill said, as Treasury confirmed it was reviewing whether a criminal investigation should be pursued against the former PwC partner behind the tax avoidance scandal engulfing the firm.

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With AP

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