ASX rallies as US rates fear fades

NCA NewsWire

11 October 2023 at 3:29 am·3-min read

The benchmark finished in the green for the fifth straight day on fresh hopes the Fed might be done with its punishing round of monetary tightening. Photo by Mandel NGAN / AFP

It was another positive session for the Australian share market on Wednesday as fears fade that the US Federal Reserve may have further rate hikes up its sleeve and hopes of a fresh round of stimulus from Beijing.

The S & P/ASX200 index rallied 0.7 per cent to close at 7,088.4 points, up for the fifth consecutive trading session, while the All Ordinaries also rose 0.7 per cent to close at 7,281.2.

The gains followed a positive lead from Wall Street overnight as further encouraging rhetoric from Federal Reserve officials bolstered traders’ views that the central bank may be done with raising interest rates.

“The increasing consensus is that the US Fed might be down, and therefore, investors can relax about further increases. But we’ve heard this story before,” NabTrade director of investor behaviour Gemma Dale said.

Wall St rallied overnight on more dovish rhetoric from Federal Reserve officials. Photo by ANGELA WEISS / AFP

Back home, Reserve Bank assistant governor Chris Kent, speaking at a business summit in Sydney again reiterated that “some further tightening of monetary policy may be required” to return inflation back to the central bank’s target band.

Bond markets are now implying a 38 per cent of chance of a further 25 basis point rate hike by early next year, down from 68 per cent last week.

On the benchmark, 10 of 11 sectors closed out of the day of trading finishing higher, with health care stocks unchanged.

Tech stocks were best performers, with sector heavyweight Xero climbing 1.8 per cent to close at $119.74 a share.

Following reports that the Chinese government was considering the issuance of additional sovereign debt for spending on infrastructure to the tune of at least one trillion yuan ($AUD210bn), mining stocks also performed strongly.

Iron ore miners rose on news that Beijing was purportedly preparing a fresh round of infrastructure stimulus. Photo by Amy Coopes / AFP

“If the Chinese government is pivoting to infrastructure spending in order to stimulate the economy, that’s quite positive for iron ore,” Ms Dale added.

Miners jumped higher on the news with iron ore giants Rio Tinto rising 1.4 per cent to $113.79, BHP increasing 1.3 per cent to $44.73 and Fortescue adding 1.6 per cent to $21.16.

At the same time, iron ore prices rebounded from their six-week low on Tuesday with the commodity’s November contract on the Singapore Exchange rising 0.7 per cent to $US111.60 per metric tonne.

It comes as China’s property developer Country Garden warned in a statement to the Hong Kong stock exchange that it could default on its international debts, dealing another blow to the country’s toxic property sector.

Talks of fresh infrastructure stimulus coincide with an announcement from Country Garden it “expects that it will not be able to meet all of its offshore payment obligations when due or within the relevant grace periods.” Photo by Pedro Pardo / AFP

In company news, Bank of Queensland announced its cash earnings had plunged 8 per cent to $450m for the 2023-23 financial year.

“We recognise that this has been a difficult year for our shareholders and take accountability for the operational risk failings that led to the two court-enforceable undertakings,” BOQ chief executive Patrick Allaway said.

Shares in the BOQ dived 7.4 per cent to $5.35 a share and are now 30 per cent lower over the year.

In a statement to the ASX, embattled airline Qantas announced its chair Richard Goyder would depart its board in the next 12 months in an attempt to reset the airline’s flagging reputation.

“As a board, we acknowledge the significant reputation and customer service issues facing the group and recognise that accountability is required to restore trust,” Mr Goyder said in a statement on Wednesday.