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Wall Street’s best night since 2020 fuelled strong gains on the ASX, powering the benchmark to its highest level since June.

The S&P/ASX 200 rallied 163 points or 2.33 per cent by mid-session. The rally followed huge gains in the US as cooling inflation pointed to a slowdown in interest rate increases.

Ten of eleven Australian sectors rose. Gains ranged from 0.3 per cent for energy up to 4.2 per cent for the rate-sensitive tech sector. The defensive utilities sector was the only decliner as a mere 13 companies on the ASX 200 sat out the rally.

What’s driving the market

The ASX joined a global relief rally after US consumer prices increased less than expected last month. A retreat in annual price growth to 7.7 per cent from 8.2 per cent in September fuelled extraordinary gains in the US as traders bet interest rate increases will shrink from here and the top of the cycle will be lower than previously anticipated.

“Thursday’s inflation reading in the US gave investors hope that the worst of inflationary pressure may finally be behind us and may keep the Fed off its aggressive rate hike path,” Kunal Sawhney, chief executive of research group Kalkine, said.

“Investors are hopeful that the US central bank could reduce the size of its rate hikes at its next policy meeting in December, leading to a rally in beaten-down tech stocks and crypto assets,” he added.

The Dow surged 1,201 points, its strongest rise since the early days of the pandemic recovery. The S&P 500 flew up 5.54 per cent and the Nasdaq 7.35 per cent.   

The US dollar plunged. Gold jumped. Treasury yields sank by the biggest percentage since 2009.

The Australian ten-year yield followed this morning, sliding six basis points to a two-month low. The dollar jumped almost 3 per cent overnight, lately trading at 65.89 US cents.

“I think we can all agree that a 50bp Fed hike in December is now a done deal. Fed fund futures suggest an 85.4% chance of a 50bp hike, up from 56.8% just the day prior – all thanks to a glowing inflation report which will put a big smile on the Fed’s faces,” Matt Simpson, senior market analyst at City Index, said.  

The ASX 200 built towards its strongest advance since the early-October RBA rates surprise. The rally extended the market’s gain for the week beyond 3.4 per cent.

The index smashed through its 200-day moving average, a bullish signal for technical traders. The market also left technical resistance at the 7000 level far below after several failed attempts at clearing it.

Rate-sensitive property and tech stocks led the advance. Gold miners also logged strong gains after funds flowed out of cryptocurrencies and the US dollar this week into alternative stores of wealth.  

Going up

The real estate investment trust sector popped almost 4 per cent to an eight-week high as the cost of long-term borrowing declined. Goodman Group put on 6.62 per cent, Arena REIT 6.57 per cent, Charter Hall Group 6.09 per cent and Ingenia 5.9 per cent.

Tech stocks whose future profitability depends on the cost of borrowing also enjoyed a day in the sun. Megaport soared 12.83 per cent, Block 12.15 per cent, WiseTech 9.28 per cent and Altium 7.43 per cent.

Money managers shone. Pinnacle Investment Group jumped 14.5 per cent. Magellan put on 7.57 per cent. Netwealth added 10.47 per cent. Consumer lender Credit Corp gained 8.74 per cent.

The domestic gold sector rallied another 3 per cent towards its best weekly return in years. The S&P/ASX gold sub-index was lately ahead 16.1 per cent for the week.

St Barbara charged up 10.27 per cent, Perseus 4.88 per cent and West African Resources 5.31 per cent. Newcrest climbed 2.9 per cent to a four-month high after the board approved an extension to its Cadia gold and copper mine.

The big four banks gained between 1.1 and 1.8 per cent. Fortescue Metals added 4.65 per cent, Macquarie Group 5.07 per cent and James Hardie 4.61 per cent.

A decline in Covid cases fuelled increased activity at Ramsay Health Care’s private hospitals. Profitability improved last quarter as the cost of managing Covid declined from $44 million in July to $5.9 million in September. Total revenue for the quarter was 6.7 per cent stronger than the prior corresponding period at $3.445 billion. The share price rallied 4.86 per cent.

“The operating environment improved across the quarter as COVID and severe flu cases in the community declined, driving an improvement in activity levels and a reduction in the costs associated with patient and doctor cancellations and staff sick leave,” the company said.

Footwear retailer Accent Group gained 11.96 per cent after reporting a 52 per cent jump in sales for the first 18 weeks of the fiscal year. The retailer was able to increase gross margin by 570 basis points.

A profit upgrade boosted skin regeneration specialist Avita Medical 0.8 per cent. The company raised its full-year outlook after Q1 commercial revenue expanded 30 per cent to $6.9 million. Full-year commercial revenue is now expected to be $33-$34 million, up from previous guidance of $30 million.

Going down

Just 13 of the index’s component companies were lower as the halfway mark approached. Computershare fell 3.31 per cent from yesterday’s all-time closing high.

Coal miners were under the pump. Whitehaven Coal declined 5.88 per cent, New Hope 4.9 per cent and Coronado 3.33 per cent.

Takeover target Origin eased 3.36 per cent. Insurers QBE and IAG shed 1.73 and 1.42 per cent, respectively, as investors rotated into assets with more upside in a bull market.

Other markets

Stocks in Hong Kong surged 6.46 per cent. China’s Shanghai Composite gained 2.09 per cent, the Asia Dow 3.26 per cent and Japan’s Nikkei 3.17 per cent.

US futures inched higher. S&P 500 futures lifted two points or 0.05 per cent.

Oil built on its first rise in four sessions. Brent crude firmed 24 US cents or 0.26 per cent to US$93.91 a barrel.

Gold held most of last night’s 2.3 per cent rally. The yellow metal was lately down US$1.20 or less than 0.1 per cent to US$1,752.50 an ounce.

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