By Tom Richardson

Selling in Australian shares accelerated through the morning as investors worried about the impact of rising living costs on retail sales and the banks’ lending books.

The Commonwealth Bank slipped 1.5 per cent as its cash profits fell in March to take the S&P/ASX 200 down 0.9 per cent.

Shares in JB Hi-Fi tumbled 5 per cent to $56.98 after the retail darling posted flat sales for the March quarter. Elsewhere, Baby Bunting’s stock plunged 21 per cent to $1.50 after it warned sales are falling as families battle rising living costs.

Meanwhile Super Retail – the group behind Rebel Sports; Supercheap Auto; and Boating, Camping, Fishing – dropped 4.9 per cent on its sales update.

Furniture businesses Nick Scali, Harvey Norman and Temple & Webster are all down more than 4 per cent. On May 7, the ABS reported retail sales volumes dropped in the March quarter to mark their fifth fall in six quarters.

Catriona Burns a lead portfolio manager at Wilson Asset Management said the economy is seeing a “very mixed consumer”, with older generations withstanding the higher interest rate environment far better than those under 35 years old.

“In the US we’ve had McDonald’s, Starbucks, Estée Lauder pointing to wobbles at the lower income end, but then Norwegian Cruise Lines and Delta Airlines are doing well, so it’s very mixed,” Ms Burns said. “It points to the fact that excess savings are being used up and lower-income consumers are seeing more cost of living pressure in Australia as well.”

CBA’s cash profit for the March quarter slipped 5 per cent to $2.4 billion, versus the prior comparable quarter.

It said home loan lending volumes grew 3.1 per cent in the March quarter on an annualised basis, versus the December quarter. It also reported loans in arrears gradually rising across the consumer sector.

On Wall Street, the S&P 500 slipped less than 1 point at the close. The Dow edged higher, while the Nasdaq Composite edged lower. Iron ore retreated, which knocked BHP and Rio in London.

“Iron ore futures fell despite a more upbeat assessment on demand,” said ANZ Bank. “One of the world’s biggest exporters, Brazil’s Vale SA, said China’s real estate market is poised to improve in the second half of the year. It pointed to government stimulus as a reason for its more bullish outlook. It also sees strong demand from the infrastructure and manufacturing sectors.”

Sweden’s central bank unexpectedly cut its key rate by a quarter point to 3.75 per cent.

Stocks in focus

Baby Bunting downgraded its profit guidance and warned that rising living costs are hitting consumers.

JB Hi-Fi and Super Retail posted flat sales growth for the nine months to March 31.

Junior lender Judo Bank has stuck to guidance but warned bad debt provisions jumped in the March quarter.

Orica has grown its earnings before interest and tax 10 per cent for the six months to March 31.

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