Yahoo Finance ASX snaps losing streak on US CPI surprise
A rally in interest rate sensitive tech stocks propelled the Australian sharemarket higher on Thursday after easing United States inflation data bolstered traders’ bets that the Federal Reserve would move to cut interest rates this year.
Snapping a two-day losing streak, the benchmark S&P/ASX200 advanced 0.4 per cent, or 34.2 points, to 7749.7, as nine of 11 industry sectors finished in the green.
Meanwhile, the broader All Ordinaries rose by 0.5 per cent to 8002.5.
Against the greenback, the Australian dollar was lower, buying US66.5c at 5.30pm AEST.
Data released overnight showed US inflation cooled faster and more broadly than expected last month. The consumer price index rose 3.3 per cent in the year to May, the US Labor Department said, below economists’ expectations of a 3.4 per cent increase.
Hours later, Fed officials noted there had been modest progress in returning inflation towards the central bank’s 2 per cent target band.
FOMC members also pencilled in an average of one rate cut this year in its anonymised forecasts, fewer than the two cuts priced in by money markets.
Betashares chief economist David Bassanese said he expected the Fed to cut rates twice this year, with a loosening of monetary policy in September “still firmly on the table”.
“Given signs of slowing in a range of US labour demand indicators, along with the low May CPI inflation result, there’s a good chance inflation will be lower and unemployment higher by year end than the Fed currently expects,” Mr Bassanese said.
On the local macroeconomic front, fresh labour force figures released by the Bureau of Statistics showed the unemployment rate eased lower to 4 per cent last month as the economy added a bumper 39,700 new jobs.
With the labour market showing few signs of cooling in the face of a steep rise in interest rates and stubborn price pressures, economists said the result was unlikely to affect the timing of rate cuts which are not fully priced in until May next year.
“With services inflation still running hot, we think the RBA will want to see more evidence that employment is reaching sustainable levels before it contemplates a policy pivot,” Abhijit Surya from Capital Economics said.
On the ASX, the prospect of lower rates abroad boosted tech stocks, which rallied 2.1 per cent. Wistech climbed 2 per cent to $98.91, Xero added 2.3 per cent to $131.75 and NEXT DC leapt 3.6 per cent to $18.34.
Banks also buoyed the benchmark with CommBank up 1.1 per cent to $125.48, NAB rising 0.8 per cent to $35.01 and Westpac adding 0.6 per cent to $26.88. ANZ was flat at $28.77.
Meanwhile, commodity-related stocks weighed on the index, with the energy sector the biggest drag, off 0.6 per cent, after global oil prices dipped following a three-day rally.
After US crude oil prices rose by 3.7 million barrels last week, oil prices fell with Brent Crude futures trading near $US82 a barrel, while West Texas Intermediate was just shy of $US78 a barrel.
Energy majors tracked the oil price with Woodside off 0.9 per cent to $27.54, while Ampol was down 1 per cent to $33.23.
The materials sector also finished in the red as ASX-heavyweight miner BHP dropped 0.7 per cent to $43.20 and Mineral Resources was off 1.6 per cent to $63.11.
In company news, Sigma shed 3.7 per cent to $1.16 after the Australian Competition and Consumer Commission raised competition concerns after the proposed $8.8bn merger between discount pharmaceutical retailer Chemist Warehouse and the healthcare company.
The bourse operator, ASX Ltd plunged 8 per cent to $58.14 after it flagged rising technology costs and projected a 15 per cent expense growth rate for the current financial year, topping its current guidance.
