The S&P/ASX200 fell 71.9 points by midday, down 0.8 per cent, to 8,862, as the broader All Ordinaries lost 80.1 points, or 0.88 per cent, to 9,169.5.
The slip followed a subdued Wall Street session overnight after a mixed reaction to major US tech earnings, with Australian investors seemingly more interested in Wednesday's surprisingly hot inflation print.
"Locally, there'll be a focus on interest-rate sensitive stocks following higher-than-expected CPI yesterday increasing the chance of a rate hike next week to 75 per cent at the RBA's meeting next week," Moomoo dealing manager Jimmy Tran said.
Energy stocks made up the only sector trading higher by lunchtime, carving out a less than 0.2 per cent improvement, as oil prices rose to four-month highs, after US President Donald Trump threatened Iran with military action if it doesn't agree to a nuclear deal.
Coal producers were mixed and uranium stocks edged higher but appeared to be running out of steam after rallying from mid-January.
The raw materials sector is on track to snap a three-session winning streak despite gold pipping yet another all-time high to trade at $US5,591 ($A7,944), as some ASX-listed miners ran into profit-taking.
Gold is up more than 27 per cent in January, after more than doubling in value in the two years since January 2024.
Mega cap iron ore miners weighed on the bourse, with BHP (-0.9 per cent), Rio Tinto (-1.8 per cent) and Fortescue (-2.5 per cent) all dragging, as iron ore futures consolidated near $US106 a tonne after dipping in mid-January.
Mixed miners, battery mineral producers and rare earths stocks were under pressure, with the exception of South32, which carved a 0.3 per cent lift.
Mineral sands producer Iluka Resources plummeted more than 10 per cent by lunchtime after flagging a $565 million hit to its pre-tax results, due to an impairment charge
Mineral Resources shares fell 1.7 per cent despite upgrading its lithium production guidance for 2026 and maintaining expectations across its other divisions.
The heavyweight financials sector gave up 0.6 per cent as all big four banks edged lower, while insurers were mixed after fading on Wednesday.
Interest rate-sensitive sectors were under pressure, with consumer discretionaries down 1.2 per cent and staples fading 0.8 per cent, while real estate slipped 0.7 per cent and IT stocks tumbled 1.4 per cent.
In company news, Woolworths announced Jon Alferness will join its board as a non-executive director from March 1.
Fellow supermarket giant Coles slipped 0.8 per cent to $20.81 as it acknowledged a class action had been filed against it over accusations of missed worker entitlements.
The Australian dollar is trading at three-year highs against the greenback, buying 70.34 US cents and up from 70.04 US cents on Wednesday at 5pm.
Greenback weakness has supported the Aussie over uncertainty around US tariffs, Federal Reserve independence and spiralling US debt, further bolstered by rising expectations of a local interest rate hike.
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