Flicker of life: Market rallies on signs inflation is running out of puff
Investors poured into the Australian sharemarket Friday on the back of promising inflation data out of the US, but there were warnings they may be jumping the gun.
The sharemarket is moving steadily towards a 12-month high (file photo)
The ASX 200 was up 191 points, or 2.7 per cent, well below the US S&P500 which charged ahead on the release of the inflation data and closed 5.5 per cent higher. The US data showed inflation had slowed to 7.7 per cent in the 12 months to October, or a rise of 0.3 per cent for the month.
That was much less than the market had expected.
It was the best US rally in five months and the best performance from the Australian market in five weeks and the highest daily close in five months.
The basis for the increase was that the US Federal Reserve would not be as aggressive in future interest rate rises. Its last increase was 0.75 per cent.
Most Asian markets followed the US lead.
However, Citi warned that investors may have overestimated the US data.
Several major economies were also still likely to head into a recession and Moody’s forecast the G20 economies to have negative growth of 1.3 per cent in 2023.
Novonix was up almost 10 per cent at one point during the day, but fell back slightly as the afternoon wore on. Block and Megaport reached increases of 11 per cent and 13 per cent respectively.
Some energy stocks fell on the prospect of the Federal Government imposing price caps. Stanmore Resources was down 6 per cent and New Hope 3 per cent. Ballymore Resources went against the trend with a 9 per cent rise.
Hawsons Iron, which is planning an iron ore mine near Broken Hill, jumped 9 per cent after signing a binding agreement with Flinders Port on the operation and development of a greenfield port on the eastern Spencer Gulf.
“Last night’s weaker-than-expected US CPI outcome is rightfully good news for markets and helps re-widen somewhat the ‘narrow path’ ahead for the US to avoid recession,” Betashares chief economist David Bassanese said in a note.
He said the numbers cemented the case for the US Federal Reserve to moderate its campaign of rate hikes, which have pushed US interest rates to their highest levels since 2008, making equities less attractive.
The big four banks all jumped in the morning trade but fell back. Corporate Travel and Domino’s were up 7 per cent and 4 per cent, respectively in mid-afternoon trade.
