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ASX closes at record high on rate cut hopes
By Penry Buckley
Welcome to your five-minute recap of the trading day.
The numbers
The Australian sharemarket closed higher on Thursday after technology stocks drove a rally on Wall Street, where Federal Reserve comments fuelled expectations that long-sought cuts to interest rates would be arriving soon.
The S&P/ASX 200 index finished up 22.4 points, or 0.3 per cent, to 8114.70 points, a record high. Mining stocks, energy, real estate and information technology companies led the gains, with financials and industrials tracking lower.
The gains came after the local market surged 1.8 per cent in the previous session following key inflation data, which showed signs of disinflation in Australia’s economy. The data has raised hopes the Reserve Bank could start cutting rates in November, having lifted the cash rate 13 times since March 2022.
Wall Street surged higher.Credit: Bloomberg
The lifters
Pilbara Minerals was the biggest large-cap advancer, rising 4.4 per cent, followed by Mercury Energy (up 3.6 per cent) and pharmaceutical wholesaler EBOS Group, which finished 3 per cent stronger.
Mining heavyweight Rio Tinto was up 1.9 per cent, after it flagged on Wednesday it was open to potentially large-scale takeover opportunities to boost its supplies of copper in expectation of soaring demand.
BHP was trading 0.5 per cent higher and iron ore miner Fortescue rose 0.6 per cent, following its announcement Australian indigenous leader Noel Pearson had joined its board as a non-executive director.
The laggards
TPG Telecom shrank the most of the large caps, by 2.1 per cent, followed by Qantas, which fell 1.9 per cent, giving up some of its 4.5 per cent gain of the previous session, after competitor Rex Airlines (Regional Express Holdings) announced it had entered voluntary administration.
Financials (down 0.4 per cent) was the weakest sector, with NAB finishing 1.4 per cent weaker on a subdued day for the big four. CBA, the biggest stock on the local market, was down 0.9 per cent, after hitting another record high of more than $138 at the open. The nation’s biggest bank warned shareholders about items impacting its 2024 results, due on August 14, including costs of $89 million from changes to the operating model of subsidiary Bankwest, and a $298 million loss on the sale of its 99 per cent shareholding in the Indonesian PT Bank Commonwealth. Westpac was down 0.3 per cent, while ANZ ticked up 0.7 per cent.
Defence tech dealer DroneShield sank 14.8 per cent after completing a $120 million capital raising.
The lowdown
Jessica Amir, market strategist for trading platform moomoo, said the US Federal Reserve’s clearest indication yet it could begin lowering interest rates in September had boosted the Australian equities market, saying “the bottom is behind us”.
“We’ll probably continue to hit new record all-time highs for the rest of the year,” she said.
Widespread gains came as US Treasury yields eased in the bond market, after Fed Chair Jerome Powell said on Wednesday that policymakers are “getting closer to the point” of comfort about inflation where they could cut rates for the first time since COVID-19 hit the economy.
“We think that the time is approaching,” Powell said. “And if we do get the data that we hope we get, then a reduction in our policy rate could be on the table at the September meeting.”
Amir said higher commodities prices following the Fed’s the press conference had favoured local mining companies on Thursday, after a period in which the big four banks, especially CBA, had performed strongly. “Now the time has come for commodities to have a comeback,” she said.
On Wall Street overnight, the S&P 500 jumped 1.6 per cent for its best day since February. The Dow Jones rose 0.2 per cent, and the Nasdaq Composite soared 2.6 per cent.
Tweet of the day
Quote of the day
“The Fed’s softening of its conservative line on inflation and interest rates is positive for not just US financial markets but also central banks and markets elsewhere. A US rate cut would provide cover for other central banks to lower their own policy rates without the fear of sparking destabilising capital flows,” said senior columnist Stephen Bartholomeusz of Fed Chair Jerome Powell’s indication interest rates could start being cut in September.
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with AP and Bloomberg
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