The Business Times

Australia: Shares rise as investors shrug off dismal inflation data

Published Wed, Oct 26, 2022 · 03:18 PM

Australian shares extended gains on Wednesday (Oct 26), tracking overnight strength on Wall Street, as bets of a less-aggressive rate hike by the US Federal Reserve trumped concerns over dismal outcome of domestic inflation print.

The S&P/ASX 200 index edged up 0.2 per cent, after having risen 0.6 per cent earlier in the day, to close at 6,810.9 points. The benchmark closed 0.3 per cent higher on Tuesday.

Overnight US data showed slowing home price growth and souring consumer confidence. Such signs of economic softness, ordinarily unsupportive of risk appetite, are evidence of abating Fed hawkishness.

However, that was not the case back home as surging costs of home building and gas pushed Australia’s consumer price index to a 32-year high last quarter, giving rise to concerns that the Reserve Bank of Australia (RBA) might opt for an oversized rate hike.

“Despite today’s inflation reading, the RBA is unlikely to go for more than a 25 basis points rate hike next week because they must have factored in this high inflation print,” said Kunal Sawhney, chief executive officer at Kalkine Group.

“The cash rate hikes announced so far are yet to show their full impact on consumer behaviour and prices. Stronger signs of a decline in inflation will probably emerge next year before the RBA goes for its first meeting of 2023 in February,” he added.

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Australian technology stocks traded flat, while financials inched 0.1 per cent higher with the “Big Four” banks climbing between 0.2 and 0.5 per cent.

Leading gains in the benchmark, gold stocks climbed 2.1 per cent as an easing US dollar made greenback-priced bullion less expensive for overseas buyers.

Miners edged 0.3 per cent higher, while energy stocks fell 1.4 per cent as oil prices eased after data showed US stockpiles rose more than expected.

Medibank Private tumbled as much as 18.1 per cent to post its worst day, after the country’s biggest health insurer warned of a A$25 million (S$21.8 million) to A$35 million hit to first-half earnings from costs related to a data breach.

New Zealand’s benchmark S&P/NZX 50 index rose 1.3 per cent to finish the session at 11,046.5 points. REUTERS

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