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The ASX 200 scaled a seven-month high as the prospect of a slowdown in US interest rate hikes sparked a global rally in equities.
The Australian benchmark touched 7375, its strongest reading since early May, before paring its rise to 70 points or 0.96 per cent at 7354.
Miners set the pace as the local market played catch-up with huge overnight gains on Wall Street. Utilities, property stocks and small caps also drew a bid. Energy was the biggest drag as gas giant Woodside Energy fell for the fifth time in six sessions.
What moved the market
US stocks took wing after Federal Reserve Chair Jerome Powell signalled the central bank was preparing to scale back this year’s aggressive run of interest rate increases.
“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said in a speech at the Brookings Institution think tank in Washington.
The Fed Chair went on to temper his message with a warning that the war on inflation had a long way to run and the top of this rates cycle was still some way off. Still, investors heard what they wanted to hear: no more jumbo rate hikes.
The odds on a 50 basis point increase at this month’s meeting firmed to 75 per cent. A hike of that scale would break a run of four straight increases of 75 bp.
The S&P 500 surged from a modest loss before the speech to a gain of 122 points or 3.09 per cent. The Dow Jones Industrial Average jumped 737 points or 2.18 per cent. The Nasdaq Composite soared 484 points or 4.41 per cent.
Asian markets gave chase, boosted by news that Guangzhou emerged from lockdown today. The Asia Dow gained 2.48 per cent. China’s Shanghai Composite popped 0.65 per cent, Hong Kong’s Hang Seng 1.6 per cent and Japan’s Nikkei 1.12 per cent.
A plunge in the US dollar handed dollar-denominated commodity prices a welcome boost. Also helping mining stocks here was an unexpected improvement in a measure of Chinese factory activity. Caixin’s manufacturing purchasing managers’ index rose to 49.4 last month from 49.2 in October. Economists expected an upsurge in Covid cases and tighter restrictions to drag the index down to 48.9.
The ASX has been in steady recovery since the Reserve Bank surprised the market by increasing the cash rate target by 25 bp back in early October when economists expected another 50 bp hike. Today’s rally carried the ASX 200 index to within 3.5 per cent of last year’s all-time high.
Winners’ circle
Mining stocks led after the falling greenback lifted the prices of precious and industrial metals. Gold climbed 1.1 per cent overnight and put on another 1.9 per cent this afternoon. Copper popped 4 per cent in US trade.
Gold miners filled many of the top slots on the index. Ramelius Resources jumped 10.53 per cent, Evolution Mining 6.32 per cent and West African Resources 6.06 per cent. Sector heavyweight Newcrest climbed 4.29 percent to a five-month high.
Outside the gold space, diversified miner South32 gained 6.72 per cent, nickel-copper miner Chalice Mining 5.65 per cent and Champion Iron 5.82 per cent.
US-focused James Hardie was the pick of the heavyweights, charging up 5.41 per cent. Rio Tinto advanced 3.29 per cent, Fortescue Metals 2.99 per cent and BHP 2.11 per cent. The big four banks put on between 0.44 and 0.85 per cent.
Tech offered some of the session’s best returns on the prospect of lower borrowing costs. Afterpay’s parent company Block tacked on 7.38 per cent, Xero 6.16 per cent and Megaport 4.55 per cent. Investment firm Pinnacle added 7.27 per cent.
Domino’s Pizza entered a trading halt to raise $165 million to take full ownership of its German joint venture. The proceeds will be used to exercise an option to purchase any shares in the joint venture the fast food franchisor does not already own.
Doghouse
Downer EDI slid 2.32 per cent on news CEO and Managing Director Grant Fenn will retire in February after twelve and a half years with the integrated services provider. Current Chief Operating Officer Peter Tompkins will step into the role. Chair Mark Chellew said Tompkins “has extensive and detailed experience across Downer’s operations, risk management and corporate functions”.
Cochlear dipped 0.49 per cent after the competition regulator raised concerns about the firm’s proposed acquisition of Oticon Medical. The ACCC said it was concerned the acquisition would substantially lessen competition in the hearing implant market. Cochlear said it disagreed and would work with the regulator to address the matters raised.
Woodside Energy slid 1.72 per cent as an investor briefing this morning failed to steady the ship following disappointing full-year production guidance earlier in the week.
Other heavyweight drags included Coles -0.83 per cent and CSL -0.48 per cent.
Other markets
The dollar surged back above 68 US cents as the greenback retreated, lately trading at 68.07 US cents.
Gold stormed higher. The yellow metal rallied US$33.60 or 1.9 per cent to US$1,793.50 an ounce.
S&P 500 futures advanced eight points or 0.18 per cent.
Oil trimmed last night’s 2.9 per cent rally. Brent crude eased 22 US cents or 0.25 per cent to US$86.75 a barrel.
