The share market hit a nine-month high in early trade before finishing well off its session peak as sellers cashed out ahead of a likely rate rise next week.
The S&P/ASX 200 rallied 47 points in morning action before giving up much of its gains. The index finished just 9.9 points or 0.13 per cent ahead, mirroring similar fades on Tuesday and Wednesday.
Growth stocks, real estate investment trusts and gold miners spearheaded the advance. The heavily-weighted materials and financials sectors rolled over in afternoon trade, joining energy and utilities in negative territory.
What moved the market
A promising open gave way to profit-taking for a third day ahead of next week’s Reserve Bank rate decision.
“In a carbon copy of the price action viewed in the prior two sessions, the ASX200 this morning traded to a fresh nine-month high before sellers again emerged to lean into early strength,” IG market analyst Tony Sycamore said.
“The persistent selling in the local market is likely a large institutional player getting out of the Australian market in favour of global stock markets with a higher percentage of growth stocks than our value-laden index. Or possibly on concerns that the RBA still has much more work to do to break the back of stubborn inflation, as speculation increases of a larger than expected RBA rate hike next week.”
Commonwealth Bank today said the Reserve Bank could surprise the market with a 40 basis points hike next week, lifting benchmark rates to 3.5 per cent. The bank might then pause to assess the impact of the dramatic increase in rates over the last nine months. Official rates have jumped from 0.1 per cent last April to 3.1 per cent in December.
“Markets should be aware of the risk that the RBA restores the cash rate to a conventional metric in February and announces an intention to pause,” CBA economist Gareth Aird said.
The ASX’s RBA Rate Indicator tool sets the odds on a 25 basis points hike at 75 per cent. The stats reflect current interbank cash rates futures.
Today’s early strength came after US investors welcomed signs US interest rates were nearing a top. The Federal Reserve raised the federal funds rate target by 25 basis points, but sugared the pill by confirming inflation was falling and it foresaw no more than “a couple more” hikes.
“For the first time, we can declare that a deflationary process has begun,” Chair Jerome Powell said. Inflation could fall back to the Fed’s 2 per cent target “without a really significant downturn”, he added.
The S&P 500 swung from a loss of almost 1 per cent to a gain of 1.05 per cent. The Dow flipped a 500-point tumble into skinny gain of 0.02 per cent. The Nasdaq Composite, home to many of the companies that rely most on borrowing, jumped 2 per cent.
Growth stocks rallied in expectation that last year’s biggest headwind was abating. US ten-year treasury yields slumped 11 points after the Fed announcement. The Australian ten-year yield dropped 4.5 points.
Megaport surged 11.11 per cent. Xero gained 7.47 per cent. WiseTech added 6.77 per cent.
Gold miners gave chase as a falling US dollar helped propel the yellow metal to a fresh nine-month high. Gold for April delivery flew up US$25.70 or 1.3 per cent to US$1,968.50 an ounce.
Evolution Mining led with a rise of 5.99 per cent. Gold Road Resources put on 5 per cent, Silver Lake Resources 3.97 per cent and Northern Star 4.59 per cent. Industry heavyweight Newcrest popped 3.68 per cent.
The highly-geared property sector also benefitted from the improving rates outlook. Charter Hall Group advanced 6.41 per cent, HMC Capital 4.91 per cent and Centuria Capital 3.48 per cent.
A rebound in demand for office space helped lift Centuria Office REIT 7.98 per cent to a five-month high. The trust leased 24,000 square metres of vacant space in the first half, raising its portfolio occupancy rate to 96.4 per cent. The company reaffirmed its full-year guidance.
“With positive industry data revealing an increasing number of workers returning to the office across all capital cities and tenants generally seeking to accommodate peak office occupancy rather than average occupancy, we are confident tenant demand will continue in the near term,” Centuria Fund Manager and Head of Office Grant Nichols said.
Credit Corp rallied 6 per cent after yesterday predicting a strong rebound this half following a 30 per cent slide in first-half profit.
Energy producers sank after crude prices were pressured by a sixth straight weekly increase in US stockpiles. Brent crude swooned 3.1 per cent.
Woodside Energy shed 0.98 per cent. Santos lost 1.56 per cent. Other significant drags included Rio Tinto -2.34 per cent and BHP -1.41 per cent following a second straight fall in iron ore prices.
Investment manager Pinnacle dropped 2.69 per cent after first-half profit slumped 24 per cent. Net profit after tax fell to $40.1 million from the prior corresponding period. Performance fees contracted as the company experienced “challenging” domestic conditions.
Insurer QBE sank 4.76 per cent a day after closing just shy of a two-year high.
Traditional defensive stocks fell as traders rotated into companies with more upside if this year’s market recovery gathers pace. Bega Cheese dropped 2.32 per cent, Suncorp 2.3 per cent and Costa Group 2.09 per cent.
US futures firmed after a huge after-market rally in Facebook owner Meta Platforms. The US tech heavyweight surged 20.16 per cent in extended trade as the market welcomed spending cuts and a stock buyback.
S&P 500 futures climbed 15 points or 0.36 per cent. Nasdaq futures soared 1 per cent.
Asian markets rose in unison. The Asia Dow gained 0.79 per cent, China’s Shanghai Composite 0.29 per cent, Hong Kong’s Hang Seng 0.41 per cent and Japan’s Nikkei 0.24 per cent.
Oil clawed back some of last night’s 3.1 per cent loss. Brent crude bounced 76 US cents or 0.9 per cent to US$83.60 a barrel.
The dollar edged up 0.02 per cent towards a seven-month high, trading at 71.49 US cents.