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The share market sealed its longest winning run in six weeks with a fourth day of gains amid expectations tonight’s US consumer price index will confirm inflation has peaked.
The S&P/ASX 200 rallied 45 points or 0.65 per cent. This afternoon’s close at 7009.7 was the benchmark’s first above 7000 in more than two weeks.
Gold and lithium miners, energy producers and real estate investment trusts were among the best-performing pockets of the market. Healthcare providers and tech stocks dragged.
Ramsay Health Care and Link Administration sank after takeover proposals ran into trouble.
What moved the market
The ASX kept pace with Wall Street’s win streak as the mood on financial markets remained constructive heading into tonight’s August US CPI. The ASX 200 has bounced 280 points or almost 4.2 per cent in four sessions.
The recovery has come as US investors anticipate a decline in headline inflation tonight will allow the Federal Reserve to slow its current aggressive pace of rate increases. The S&P 500 climbed 1.06 per cent overnight to a two-week high.
“A soft print would give markets hope that inflation has peaked, with focus then shifting to how quickly it is expected to ease,” NAB’s Director, Economics, Tapas Strickland, said,
Expectations for a market-friendly reading were sharpened by a retreat in consumer inflation expectations. The New York Fed reported its measure of inflation expectations fell for a second month.
“The median 1yr ahead fell to 5.7% from 6.2%, and is well down from its peak of 6.8% in June 2022, but is still well away from the pre-pandemic level of 2.5%,” Strickland said.
“The details of the report suggest a lot of the decline is being driven by gas prices with consumers expecting gas prices to be unchanged for the year ahead, while price expectations for other commodities are still elevated,” he added.
Back home, a report this morning showed business confidence remained strong last month, boosted by favourable trading conditions. NAB’s confidence index rose three points to +10. Conditions improved by a point to +20.
“The recent strength in business conditions carried into August,” NAB Group Chief Economist Alan Oster said. “Official data for retail sales in July confirmed spending remained robust, as suggested by the previous survey, and today’s release shows little sign that August was much different. Conditions are strong across most industries other than construction, where profitability remains a challenge.”
Consumers remained more cautious. Westpac’s consumer sentiment gauge edged up 3.9 per cent but at 84.4 remained near historic lows. The rise was the first since November 2021.
“Consumers may be a little less fearful, but confidence remains very weak. Index reads in the 80-85 range mean pessimists still greatly outnumber optimists,” Westpac chief economist Bill Evans said.
Winners’ circle
Helping sentiment on the ASX were recoveries in commodity prices as the US dollar pulled back from two-decade highs. Silver jumped 5.8 per cent to a sixth straight gain. Gold closed at its highest level of the month. Nickel rallied almost 7 per cent. Brent crude logged a third straight advance.
“A risk-on tone across markets saw commodity markets push higher. This was helped by a weaker USD, which boosted investor appetite,” ANZ’s senior commodity strategist Daniel Hynes said.
The day’s best performers were a mix of miners and growth stocks. Explorer Chalice Mining rallied 9.81 per cent, Novonix 7.52 per cent, BrainChip 5.79 per cent and HUB24 5.73 per cent.
Among the heavyweights, property giant Goodman gained 2.61 per cent, James Hardie 1.73 per cent and CBA 1.72 per cent. Energy producers Santos and Woodside added 1.56 and 1.44 per cent, respectively.
Star Entertainment climbed 4.51 per cent despite a NSW inquiry finding the company unfit to operate its Sydney casino. The inquiry found the company had reaches provisions of the act governing its licence.
AGL Energy firmed 1.54 per cent after reporting a delay in restarting a unit at the Loy Yang A coal power station in Victoria would not have a material impact on earnings. The outage at Unit 2 is now expected to extend to the second half of October while a part is manufactured overseas. The hit to earnings will be offset by a strong performance in other units.
Imugene rallied 2.22 per cent to 23 cents after announcing an institutional placement at 20 cents to raise $80 million. Funds will be used to develop the oncology firm’s three platform technologies.
Atlas Arteria was placed in suspension for an equity capital raising to fund the purchase of a two-thirds interest in a US toll road. The tollway operator will pay US$2.023 billion for a 66.67 per cent majority interest in the Chicago Skyway toll road.
Doghouse
Ramsay Health Care skidded 10.35 per cent after a consortium led by KKR declared it would not improve its revised takeover offer for the private hospital operator. The Ramsay board said it had not had time to consider the correspondence from the consortium. KKR told the firm it would be willing to re-engage if Ramsay reset its valuation expectations.
Link Administration slumped 20.09 per cent after a takeover proposal ran into a regulatory hitch in the UK. The UK financial regulator warned Link’s prospective suitor Dye & Durham could be liable for up to $519 million to cover redress payments for the failed Woodford Equity Income Fund. A Link subsidiary, Link Fund Solutions Ltd (LFSL), was administrator of the fund.
Link said it did not agree with the UK regulator’s view. Link Group considered any liability to be confined to LFSL. Dye & Durham had yet to indicate its position on the matter.
Rare earths miner Lynas eased 0.34 per cent on news of water supply issues at its Malaysian plant. A “catastrophic equipment failure” at the local supplier was expected to affect production for at least another week.
Other markets
A day of mostly modest gains on Asian markets saw the Asia Dow add 0.55 per cent, China’s Shanghai Composite 0.16 per cent, Hong Kong’s Hang Seng 0.26 per cent and Japan’s Nikkei 0.2 per cent.
US futures rose in afternoon trade. S&P 500 futures firmed seven points or 0.17 per cent.
Oil retreated for the first time in four sessions. Brent crude declined 28 US cents or 0.3 per cent to US$93.72 a barrel.
Gold pulled back from a two-week high. The yellow metal fell US$8.80 or 0.5 per cent to US$1,731.80 an ounce.
The dollar reversed 0.26 per cent to 68.75 US cents after brushing 69 cents overnight.
