STOCKS FALL, BANKS GET CRUSHED: What you need to know

Oleksandr Gorshkovozov and Illya Kvasha of Ukraine at the Diving World Series 2016 in Dubai. Francois Nel/Getty Images

The Australian market closed lower.

Here’s the scoreboard:

  • S&P ASX 200: 5,187.70 -32.94 -0.63%
  • All Ordinaries: 5,250.90 -32.73 -0.62%
  • AUD/USD: 0.7613 -0.0135 -1.74%

The ASX 200 dropped below the key support level of 5200 as the market reversed direction and lost early gains. Most stocks on the index gained but the overall market was dragged down by a rout in bank stocks.

The first fall in official inflation in seven years gave rise to speculation of another cut in official interest rates.

This smashed the Australian dollar down 1.5% against the US dollar.

The ASX had been riding high in early trade, up as much as 1%, but the banks were sold down on the official inflation data. The market saw another rate cut further squeezing margins for the banks.

The Commonwealth was down 2.4% to $73.76, the NAB 2.18% to $26.90, the ANZ 1.5% to $23.88 and Westpac 2% to $30.94.

The miners continued their slide with Rio Tinto down 2% to $48.42 and Woodside 2.8% to $27.45.

The top stories Wednesday:

1. A rate cut is suddenly a real chance. Markets have just dramatically revised higher the chances of the RBA cutting interest rates next week. Also read: Economists react to Australia’s exceptionally weak inflation report.

2. The dairy glut. Murray Goulburn managing director Gary Helou is stepping down as Australia’s largest milk processor downgrades its profit forecasts by at least a third and cuts the price it pays to farmers. Its price dropped 42% to close at $1.24.

3. A good pay rise. Former David Jones CEO Mark McInnes is smoking Myer as head of Solomon Lew’s retail group. Premier Investments shares were up 1% to $15.64.

4. Broadspectrum sold down. The Papua New Guinea Supreme court declared the detention of 850 asylum seekers at Manus Island illegal under the country’s constitution. Also read: Australian government’s position is unchanged.

5. High intensity cannabis. MGC Pharmaceuticals has bought a Czech-based company so it can develop new strains of medicinal cannabis and increase production. Its shares were up 3.5% to $0.058.

6. Reinventing insurance. Suncorp has bought a $5 million stake in a startup which lets you instantly insure your laptop or bike

7. The ANZ-Roy Morgan consumer confidence index. Australian consumer confidence fell heavily last week, dragged down by renewed pessimism towards the economic outlook.

8. Sleep treatment. ResMed posted a 3% fall in net income to $US88.458 million ($A115 million) for the third quarter as the medical equipment maker expands. Its shares closed 3.6% lower at $7.59.

9. Future jobs. There’s a quiet revolution under way in Australian energy sector employment.

10. The real differences between the submarines on offer. Why France won the $50 billion contract to build Australia’s next fleet of submarines.