Australian shares jump as weak jobs data tempers RBA rate-hike bets

AUSTRALIAN equities closed higher on Thursday after weak employment data prompted investors to trim bets on a near-term rate hike, while optimism over a potential US-Iran peace deal added support.

The benchmark S&P/ASX 200 index rose 1.5 per cent to 8,621.70 points, logging its best close in a week, after falling 1.3 per cent on Wednesday to close below the 8,500 support level.

April’s employment data came in below expectations, reinforcing hopes that the Reserve Bank of Australia may pause its policy tightening cycle.

The market has now dialled back expectations for a June rate hike to 10 per cent from 20 per cent earlier, but largely anticipates the key interest rate to reach 4.6 per cent by year-end, implying just one 25 basis point hike from the current 4.35 per cent.

“The RBA would prefer to see a sustained increase in unemployment rate for 2-3 months to change their stance but one month moves tend to be noisy,” My Bui, an economist at AMP said.

Meanwhile, US President Donald Trump said the country was prepared to attack Iran if Teheran did not agree to a peace deal but also suggested Washington could wait a few days to “get the right answers.”

Back home, miners rose 2.5 per cent, with BHP Group and Rio Tinto advancing 3.1 per cent and 3.2 per cent, respectively. On the other hand, energy stocks declined 1 per cent, its worst session since May 8.

The market is rotating out of energy stocks and into miners exposed to cyclical upswings amid hopes that Trump administration could reach some form of agreement with Iran ahead of the midterm elections, Garry Laurence, chief investment officer at Profeta Investments said.

Financials rose 1.5 per cent, with the “Big Four” banks gaining between 0.9 per cent and 2.3 per cent. Technology stocks closed flat after rising as much as 1.6 per cent, tracking gains in Wall Street overnight after Nvidia’s better-than-expected revenue forecast.

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New Zealand’s benchmark S&P/NZX 50 index advanced 0.9 per cent to 12,878.07 points. REUTERS