Inflation spike hopes to lift market for fourth day – The Market Herald

The equity market sealed its longest winning streak in six weeks with a fourth day of gains as tonight’s US consumer price index will confirm that inflation has peaked.

The S&P/ASX 200 rallied 45 points or 0.65%. This afternoon’s close at 7009.7 was the benchmark’s first above 7000 in more than two weeks.

Gold and lithium miners, energy producers and real estate investment trusts were among the best performing pockets of the market. Healthcare providers and technology stocks lagged.

Ramsay Health Care and Link Administration sank after takeover proposals ran into trouble.

What moved the market

The ASX followed Wall Street’s winning streak as the mood in financial markets remained constructive ahead of tonight August US CPI. The ASX 200 rebounded 280 points or almost 4.2% in four sessions.

The rally came as US investors expect a drop in headline inflation tonight will allow the Federal Reserve to slow its current aggressive pace of rate hikes. The S&P500 climbed 1.06% overnight to a two-week high.

“A soft print would give markets hope that inflation has peaked, with the focus then on how quickly it should subside,” said NAB economics director Tapas Strickland,

Expectations of a market-friendly reading were heightened by a pullback in consumption inflation expectations. The New York Fed announced that its measure of inflation expectations had fallen for a second month.

“The 1-year-ahead median fell to 5.7% from 6.2%, and is well down from its peak of 6.8% in June 2022, but is still well off the pre-pandemic level. 2.5%,” Strickland said.

“Report details suggest that much of the decline is due to gasoline prices, with consumers expecting gasoline prices to remain unchanged for the year ahead, while expectations prices for other commodities are still high,” he added.

Back home, a report this morning showed business confidence remained strong last month, boosted by favorable trading conditions. The NAB Confidence Index rose three points to +10. Conditions improved from one point to +20.

“The recent strength in trading conditions continued into August,” said NAB Group Chief Economist Alan Oster. “Official retail sales data for July confirmed that spending remained robust, as suggested by the previous survey, and today’s release shows few signs that August was much different. Conditions are good in most sectors other than construction, where profitability remains a challenge.

Consumers remained more cautious. Westpac’s consumer confidence gauge edged up 3.9%, but at 84.4 it remained near historic lows. The increase was the first since November 2021.

“Consumers may be a little less fearful, but confidence remains very low. The index is in the 80-85 range, which means the pessimists still far outnumber the optimists,” said Westpac chief economist Bill Evans.

winner’s circle

The supportive sentiment on the ASX was the recovery in commodity prices as the US dollar retreated from its two-decade highs. Silver jumped 5.8% for a sixth consecutive gain. Gold closed at its highest level of the month. Nickel rebounded almost 7%. Brent crude recorded a third consecutive advance.

“A risk-driven tone in the markets pushed commodity markets higher. This was helped by a weaker dollar, which boosted investor appetite,” said ANZ senior commodities strategist Daniel Hynes.

Days best performers were a mix of miners and growth stocks. Explorer Chalice Mining gained 9.81%, Novonix 7.52%, BrainChip 5.79% and HUB24 5.73%.

From heavyweight, real estate giant Goodman gained 2.61%, James Hardie 1.73% and CBA 1.72%. Energy producers Santos and Woodside added 1.56% and 1.44% respectively.

Featured Entertainment climbed 4.51% despite a New South Wales investigation finding the company unfit to operate its Sydney casino. The investigation revealed that the company had met the provisions of the law governing its license.

AGL Energy firmed 1.54 per cent after it announced that a delay in restarting a unit at the Loy Yang A coal-fired power station in Victoria would not have a significant impact on profits. The Unit 2 shutdown is now expected to extend through the second half of October while a part is manufactured overseas. The impact on earnings will be offset by strong performance in other units.

Imugene rallied 2.22% to 23 cents after announcing an institutional placement at 20 cents to raise $80 million. The funds will be used to develop the oncology society’s three technology platforms.

Atlas Artery was put on hold for an equity fundraiser to finance the purchase of a two-thirds stake in a US toll road. The tollway operator will pay US$2.023 billion for a 66.67% controlling interest in the Chicago Skyway tollway.

Doghouse

Ramsay Health Care slipped 10.35% after a KKR-led consortium said it would not improve its revised takeover bid for the private hospital operator. Ramsay’s board said it had not had time to review the consortium’s correspondence. KKR told the company it would be willing to re-engage if Ramsay reset its valuation expectations.

Link management fell 20.09% after a proposed takeover hit a regulatory snag in the UK. Britain’s financial regulator has warned Link’s potential suitor Dye & Durham could be held liable for up to $519 million to cover reparations payments for the bankrupt Woodford Equity Income Fund. A subsidiary of Link, Link Fund Solutions Ltd (LFSL), was the administrator of the fund.

Link said he disagreed with the UK regulator’s view. Link Group considered all liability to be limited to LFSL. Dye & Durham had not yet indicated its position on the matter.

rare earth miner Lynas fell 0.34% following news of water supply problems at its Malaysian plant. A “catastrophic equipment failure” at the local supplier was expected to affect production for at least a week.

Other markets

A day of mostly modest gains on Asian markets saw the Asia Dow add 0.55%, China’s Shanghai Composite 0.16%, Hong Kong’s Hang Seng 0.26% and Japan’s Nikkei 0.2%.

US Futures Contracts rose in afternoon trade. S&P 500 futures firmed seven points or 0.17%.

Oil retreat for the first time in four sessions. Brent crude fell 28 US cents or 0.3% to US$93.72 a barrel.

Gold fell from a two-week high. The yellow metal fell US$8.80 or 0.5% to US$1,731.80 an ounce.

The dollar reversed 0.26% to 68.75 cents US after hovering near 69 cents overnight.

Carol N. Valencia