Australian shares are riding high today on news from the US that Fed chair Jerome Powell is eyeing an easing of monetary policy.
The S&P/ASX200 has gained 51.50 points or 0.64% to 8,075.40 today, with the top performers being Deep Yellow Ltd (ASX:DYL) and Paladin Energy Ltd (ASX:PDN), up 17.50% and 11.46% respectively.
Over the last five days, the index has gained 1.31% and is currently 0.90% off its 52-week high.
Across the sectors, the board was mostly bright and deeper green, with the noticeable exception of Consumer Staples, down 0.90%, while Information Technology (-0.04%) and Industrials (-0.04%) were trading just short of even.
Financials led the positivity, up 1.10%, followed by Energy and Real Estate, both up by 1.02%.
Powell sounds dovish
Powell indicated in his much-anticipated speech at Jackson Hole that the balance of risks had shifted toward the labour market, noting it had cooled and was unlikely to be a source of inflationary pressure. He said that the Fed did not “seek or welcome further cooling in labour market conditions”.
IG’s Tony Sycamore notes: “While Powell did not comment on the size or pace of the cutting cycle, saying it will be dependent on ‘incoming data, the evolving outlook, and the balance of risks’, there was language that opened the door for a 50bp cut in September.
“The rates market is pricing in a 75% chance of a 25pb cut and a 25% chance of a 50pb cut in September.
“The August NFP report due on September 6 will be pivotal in deciding which it is. If the US economy were to create less than 100k jobs in August and if the unemployment rate were to print at 4.3% or higher it would tip the balance in favour of a 50bp Fed cut in September.”
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