Australian shares have defied expectations of a dip today, gaining 72.2 points or 0.95% to 7,672.40 as investors rejoiced on the back of CPI data that seemed to indicate inflation is off the boil. This marks the highest recorded close in the index's history, a powerful signal that the stock market is building momentum once again.
Over the last five days, the index has gained 1.62%.
CPI figures surprise and delight
The December quarter Consumer Price Index (CPI) rose by 0.6% for an annual rate of 4.1% year on year, coming in below the widely expected 4.3% and well below the 5.4% for the preceding quarter.
The trimmed mean inflation – the measure the RBA prefers – rose by 0.8% quarter on quarter and fell 4.2% year on year, a significant drop from 5.2% in September and lower than the RBA's forecast of 4.5%.
“This was the smallest quarterly rise since the March 2021 quarter,” ABS head of prices statistics Michelle Marquardt pointed out.
IG’s Tony Sycamore said of the news: “While today's release won't move the dial in the lead-up to next week's RBA board meeting, expected to see the cash rate kept hold at 4.35%, it does reinforce expectations of RBA rate cuts in the second half of 2024.
“Before the release, the rates market assigned a 50% chance of an RBA rate cut in June with a 100% probability of a cut priced for September.
“We expect two rate cuts – the first in August – in the second half of 2024, which will take the RBA’s cash rate back to 3.85%.”
As for the share market, Sycamore had this to say:
“After completing a corrective pullback at the mid-January 7,322 low, the expectation was to retest the 7,633 double top, which has now been achieved.
“More significant battles now need to be fought. To open up a move towards 7,900, the ASX200 needs to see a sustained break above the year-to-date highs at 7,633.”
Tech titans duke it out
The first of the mega-tech companies, Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL), reported earnings after the closing bell in the US. During the session, share prices of both companies and the Nasdaq traded modestly lower while investors waited for clarity on whether share valuations were justified.
eToro market analyst Josh Gilbert had some thoughts on this:
“Microsoft has delivered on earnings as it usually does, posting another stellar quarter with all revenue segments beating expectations.
“Revenue for its fiscal second quarter rose by 18% to US$62 billion while profit jumped by 33% marking one of its best quarters in history.
“Amid a boom in the adoption of OpenAI technologies, Microsoft’s early investment in AI continues to pay off and make the tech giant some serious cash.
“Azure, Microsoft’s cloud business, reported 30% growth and beat consensus, a result that will be well-received by Wall Street after four quarters of slower growth.
“With enterprise spending on cloud services on the rise, good times are set to continue for Microsoft and its investors, who can be nothing but pleased with this report.
“Microsoft has demonstrated today why it’s the most valuable company on the planet and shows no signs of slowing down.
“Satya Nadella and his team were early adopters of AI, made strategic investments and are now blowing their competition out of the water.”
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