Join our daily newsletter At The Bell to receive exclusive market insights
A seventh rise in eight sessions powered the share market to its highest in more than a month after Wall Street welcomed further evidence of inflation cooling.
The S&P/ASX 200 rallied 63 points or 0.87 per cent to 7344. A strong start to 2023 has recouped almost all of the index’s losses across last month’s four-week losing streak.
Energy producers led after crude logged its longest win streak since last February. An eight-month high in gold lifted precious metal miners.
What’s driving the market
US stocks extended this week’s gains after consumer prices declined for the first time in more than a year. The consumer price index declined 0.1 per cent last month, bringing the annual rate of headline inflation down to 6.5 per cent from 7.1 per cent in November.
Stocks rallied as the odds on a smaller interest rate increase jumped to 91 per cent. Goldman Sachs said “the December CPI likely seals the deal on a shift to 25bp hikes in February” from 50bp in December and 75bp in prior months.
The S&P 500 overcame an initial wobble to grind out a gain of 0.34 per cent. The Dow and Nasdaq Composite both put on 0.64 per cent.
“Now that CPI data suggests prices are on a downward slide after growing for 2.5 years, markets can build on the gains. Wall Street’s rise overnight is driving the Aussie market as it usually does,” Kunal Sawhney, chief executive of research group Kalkine, said.
“The primary goal of the Fed is to bring in price stability, and if it appears to the central bank that its rate moves have brought in the required result, the bank can slow down and even hit the pause button on rate hikes sooner than expected.”
Bond yields, which reflect expectations for official interest rates, declined on both sides of the Pacific. The Australian ten-year yield dropped four basis points this morning to 3.57 per cent, a three-week low. The one-year yield dropped to 3.19 per cent, close to the official cash rate of 3.1 per cent. The ten-year yield in the US tested four-week lows.
This morning’s rally extended the ASX 200’s advance for the year to 4.3 per cent. At this morning’s peak, the index drew within 20 points of its December seven-month high.
Mining heavyweight BHP has provided much of the momentum since the turn of the year. The index’s largest company by market capitalisation hit a fresh record this morning, trading as high as $49.92 before paring its advance to 0.91 per cent at $49.83.
The rise came as iron ore prices in China rose another 0.93 per cent. The market’s other megacaps, Commonwealth Bank and health giant CSL, also advanced.
Going up
Energy producers led after oil extended its winning run into a sixth session in the US. Overnight, West Texas Intermediate settled 98 US cents or 1.3 per cent ahead at US$78.39 a barrel. The international benchmark, Brent crude, settled US$1.36 or 1.65 per cent higher at US$84.03.
Santos climbed 3.3 per cent, Woodside 1.54 per cent and Beach Energy 1.41 per cent. Coal miner New Hope gained 5.49 per cent, Karoon Energy 3.76 per cent and Ampol 2.86 per cent.
An eight-month high in gold lifted the S&P/ASX sub-index of gold miners to a level last seen in May. Ramelius firmed 2.84 per cent, De Grey 2.99 per cent and Newcrest 1.44 per cent.
The financial sector hit a four-week peak, fuelled by a 1.51 per cent rise in CBA and a gain of 1.43 per cent for NAB. ANZ added 1.32 per cent. Westpac firmed 1.02 per cent.
Tracking app-maker Life360 popped 10.86 per cent after announcing job cuts to accelerate its drive towards profitability. The company will generate annual cost savings of at least $15 million by reducing its workforce by around 14 per cent.
Going down
Defensive stocks struggled as traders sought better exposure to a market recovery. Supermarkets Woolworths and Coles lost 0.58 and 0.42 per cent, respectively.
Deterra shed 2.82 per cent, Ansell 1.56 per cent and Lifestyle Communities 1.34 per cent.
The morning’s worst performers were Imugene -5.88 per cent and Core Lithium -2.94 per cent.
Other markets
Most Asian markets advanced. The Asia Dow firmed 0.53 per cent, China’s Shanghai Composite 0.22 per cent and Hong Kong’s Hang Seng 0.16 per cent. Japan’s Nikkei gave up 1.06 per cent.
US futures backed off a one-month high. S&P 500 futures dropped seven points or 0.17 per cent.
Oil trimmed six days of gains. Brent crude dipped eight US cents or 0.1 per cent to US$83.95 a barrel.
Gold rallied US$2 or 0.1 per cent to US$1,900.80 an ounce.
The dollar eased 0.06 per cent to 69.63 US cents.
