The ASX looks set to continue a golden run today, with futures this morning predicting a rise of 0.61% to 8,191.9 points to build on yesterday’s new 100-day high.
Rate cut may be delayed
The Australian Bureau of Statistics (ABS) has released the national unemployment figures, and they’re sitting steady at 4.2%. The markets have now priced in a 70% chance of a 25 basis point rate cut by the end of the year, rather than about 90% prior to the release of this labour force data.
The Commonwealth Bank of Australia (CBA) has also revised its forecast for the RBA’s next interest rate cut, pushing the expected start of the easing cycle from November to December.
CBA’s Head of Australian Economics, Gareth Aird, cited the latest jobs data and some hawkish rhetoric from the bank’s governor as reasons for the delay.
Inflation pressures are expected to remain high in the short term, feeding the central bank's cautious approach.
There remains a risk that the RBA could delay its first rate cut further, with February 2025 being a possible alternative timeline.
Aird indicated that inflationary pressures and economic conditions could push the start of the easing cycle into the next year if the December data does not provide the necessary clarity.
US market sentiment boosted
On the back of the Fed’s recent 50-point rate cut, which kicked off a new easing cycle, US sharemarkets surged yesterday, with the S&P 500 and Dow Jones indexes reaching fresh all-time highs.
The Fed also signalled further rate cuts ahead, boosting market sentiment.
Lower jobless claims, which pointed to a robust labour market, added to optimism that the Fed could engineer a soft landing for the US economy.
The Dow Jones rose by 522 points, or 1.3%, surpassing the 42,000-point mark for the first time, while the S&P 500 gained 1.7% and the Nasdaq added 2.5%.
Growth stocks, particularly those in technology, led the rally. Microsoft (NASDAQ:MSFT) gained 1.8%, Tesla (NASDAQ:TSLA) soared by 7.4%, and Apple (NASDAQ:AAPL) climbed 3.7%.
The semiconductor sector saw notable gains, with Nvidia jumping 4% and Advanced Micro Devices (NASDAQ:AMD) up 5.7%, lifting the Philadelphia SE Semiconductor index by 4.3%.
The Russell 2000 index, which tracks small-cap companies, also climbed 2.1%.
Major banks such as Citigroup and Bank of America (NYSE:BAC) benefitted from reduced prime rates, driving the S&P 500 banks index up 2.5%.
Europe also rises
In Europe, markets mirrored the US rally, buoyed by the Fed's aggressive rate cut. Germany’s benchmark index hit an all-time high, with technology stocks gaining 3.5% and miners up 3%.
The Bank of England kept interest rates steady at 5%, while Norway’s central bank held its rate at 4.5%. The FTSEurofirst 300 index rose 1.4%, and the UK FTSE 100 gained 0.9%.
US economic data showed positive trends, with jobless claims falling by 12,000 to a four-month low of 219,000. However, existing home sales dropped 2.5% in August, and the Conference Board’s leading index fell by 0.2%.
US government bond yields were mixed, with the 10-year Treasury yield rising 3 basis points to 3.72%, while the 2-year Treasury yield dropped 2 points to 3.59%.
Australian dollar up
The dollar was also riding high following the US Federal Reserve's rate cut and local labour force data, trading 0.5% higher at 68 US cents.
In commodities, oil prices rebounded as the Fed’s rate cut lifted expectations for increased energy demand.
Brent crude rose by 1.7% to US$74.88 per barrel, while the US Nymex crude price added 1.5% to US$71.95 per barrel.
Currencies were weaker against the US dollar, with the Euro, Australian dollar and Japanese yen all easing during the session.
Base metal prices advanced on Thursday following the US Federal Reserve’s interest rate cut, which weakened the US dollar and provided support to growth-dependent commodities.
Copper and aluminium futures both saw gains of 1.1%, reflecting renewed optimism for industrial demand. The rate cut helped boost sentiment across metals markets, particularly those reliant on economic growth.
Gold prices also surged, with gold futures rising by US$16, or 0.6%, to US$2,614.60 an ounce. Spot gold neared US$2,586 an ounce by the US close after reaching a record high of US$2,599.92 on Wednesday in response to the Fed's monetary easing.
Meanwhile, iron ore futures lifted by US46 cents, or 0.5%, to US$92.03 a tonne, driven by expectations of fresh monetary stimulus from China and lower inventory levels, further enhancing market outlook for the commodity.
Market snapshot
- ASX200: +0.61% to 8,191.9 points
- Australian dollar: +0.6% to US68c
- S&P500: -0.28% to 5,618 points
- Nasdaq: -0.45% to 19,344 points
- Dow Jones: -0.25% to 41,503 points
- FTSE: -0.68% 8,253 points
- Spot Gold: +0.68% to $US2,576.4/ounce
- Brent Crude: +0.69% to US$74.16/barrel
- Iron Ore: -+1% to $92.45/tonne
- Bitcoin: +0.64% to US$62,071.1
Source: ABC