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The share market scaled a fresh eight-week high after a slowdown in US inflation raised hopes interest rates will not have to rise as high or as fast this year as previously expected.

A relief rally on Wall Street helped lift the S&P/ASX 200 by 56 points or 0.8 per cent to 7049, a level last seen on June 9.

Consumer, property and tech stocks led as nine of eleven sectors advanced. Telstra inched higher after increasing its dividend for the first time in seven years. Utilities and energy providers dragged.

What’s driving the market

Wall Street cheered a dip in headline inflation that hinted the worst of this year’s explosion in prices may have passed. Consumer prices were flat last month, massaging annual growth in the consumer price index down to 8.5 per cent from 9.1 per cent in June.

A retreat in bond yields and the US dollar encouraged traders to buy growth and resource stocks. The Nasdaq Composite jumped 2.89 per cent, outperforming gains of 1.63 per cent for the Dow and 2.13 per cent for the broader S&P 500. The S&P basic materials sector put on 2.88 per cent.

“I think it’s really because inflation has been such an overhang for investors and for the market,” Lindsey Bell, Ally Invest’s chief markets and money strategist, told CNBC. “And I think what investors are thinking today is maybe the peak really has been put in the past.”

A report released this morning showed Australians no longer expect prices to rise as high as anticipated when polled a month previous. The expected inflation rate dropped by 40 basis points to 5.9 per cent from 6.3 per cent in July, according to the Melbourne Institute.

The report suggests ordinary Australians are more relaxed about the outlook for prices than the Reserve Bank. The RBA expects headline inflation to reach 7.75 per cent this year before falling towards 4 per cent next year and 3 per cent in 2024.

The busiest day of the fledgling reporting season so far included well-received updates from QBE, Mirvac, Telstra and GQG Partners.  

Going up

A stunning week for lithium miners continued with another round of strong gains as the US Congress prepared to pass a bill containing significant support for green metals.

Lake Resources surged 11.74 per cent. Shares that traded as low as 54.5 cents less than a month ago hit $1.56 today.

Core Lithium rallied 3.11 per cent to a four-month high. Liontown Resources put on 2.76 per cent.

At the junior end, Ragusa Minerals surged 50 per cent on news its Northern Territory project has “several high priority confirmed lithium bearing targets”.

Growth stocks caught a lift from a sharp retreat in the expected cost of borrowing in the US. Novonix flew up 18.81 per cent, Life360 8.63 per cent and Block 8.5 per cent.

Telstra inched up 0.12 per cent after raising its dividend for the first time since 2015. Shareholders will receive a fully-franked final dividend of 8.5 cents per share following the completion of a four-year transformation plan, up from 8 cents.

The increase comes despite declines in several metrics. Full-year earnings slipped 5 per cent to $7.3 billion. Net profit declined 4.6 per cent to $1.8 billion.

CEO Andy Penn said the dividend hike “recognises the confidence of the Board following the success of our T22 strategy, the ambition in our T25 strategy of high-teens EPS growth from FY21 – FY25, the strength of our balance sheet and the recognition by the Board of the importance of the dividend to shareholders.”

QBE rallied 4 per cent as investors looked past a sharp decline in half-year profits attributed largely to adverse mark-to-market impacts on investments and reinsurance costs. Half-year net profit fell to $151 million from $441 million in HY21. Gross written premiums increased by 18 per cent.

Mirvac climbed 2.63 per cent after beating guidance by increasing statutory full-year profit to $906 million. Operating profit increased by 8 per cent to $596 million. Net tangible assets increased by 4 per cent.

News of net inflows of US$6.3 billion through the first six months of the year helped lift GQG Partners 3.58 per cent. Funds under management grew 23 per cent.

Going down

AMP eased 0.86 per cent as a decline in underlying half-year profit offset news the wealth manager will return $1.1 billion to shareholders. Underlying first-half net profit after tax fell to $117 million from $155 million in the same period last year.

“The strength of our balance sheet and capital position has enabled us to announce a return of capital to shareholders of A$1.1 billion. This will include a A$350 million on-market share buyback, to commence immediately, with a further A$750 million of capital returns planned in FY 23, subject to regulatory and shareholder approval,” chief executive Alexis George said.

Rio Tinto was the biggest heavyweight drag, falling 357 per cent as its shares traded without the right to the upcoming dividend.  

Computershare fell another 3.22 per cent following yesterday’s trading update.

APA Group dropped 2.47 per cent as traders rotated out of value plays into stocks with greater upside in a recovery. Other value stocks to decline included Origin Energy -1.47 per cent, Elders -2.11 per cent and AGL Energy -1.46 per cent.

Other markets

US futures built on last night’s advance. S&P 500 futures climbed 13 points or 0.3 per cent.

In Asia, the regional Dow firmed 0.11 per cent, China’s Shanghai Composite 0.46 per cent and Hong Kong’s Hang Seng 1.31 per cent. Trade in Japan was suspended for the Mountain Day public holiday.

Oil trimmed last night’s 1.1 per cent rally. Brent crude retreated 11 US cents or 0.1 per cent to US$97.29 a barrel.

Gold faded US$11.70 or 0.65 per cent to US$1,802 an ounce.

The dollar pared last night’s powerful rebound back above 70 US cents, easing 0.16 per cent to 70.7 US cents.

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