The Australian sharemarket experienced a significant upswing by lunchtime on Friday, driven by a rally on Wall Street. This surge followed a relatively tame inflation reading in the United States, coupled with the latest jobs data. The S&P/ASX 200 rose by 70 points, or 0.8 percent, reaching 8875 just after midday AEST. This increase saw nine of the eleven industry sectors in positive territory, with financials and materials leading the charge.
The big four banks saw notable gains, with Westpac leading at a 1.5 percent increase. NAB, Commonwealth Bank, and ANZ each rose by 1.3 percent. Mining shares also climbed, with iron ore heavyweights such as BHP, Rio Tinto, and Fortescue all posting healthy gains of 0.9 percent, 0.6 percent, and 0.2 percent, respectively. Gold stocks followed suit, buoyed by a rise in the price of the safe haven metal. Northern Star added 0.6 percent, and Newmont was up 1.4 percent in early trade.
However, energy shares weighed down the index, following a retreat in oil prices overnight. Woodside fell by 2.3 percent, and Santos shed 2.1 percent. Meanwhile, Virgin Australia shares increased by 2.2 percent in early afternoon trade, after the airline’s annual report revealed that former chief executive Jayne Hrdlicka departed with cash and shares worth more than $50 million.
Wall Street’s Influence and Economic Indicators
Overnight movements on Wall Street significantly influenced the Australian market. The S&P 500 rose by 0.8 percent, marking an all-time high for the third consecutive day. The Dow Jones rallied by 1.4 percent, while the Nasdaq composite climbed by 0.7 percent. US Treasury yields eased in the bond market following the release of economic reports, which are among the final data releases that could affect the Federal Reserve’s decisions ahead of its meeting next week. The consensus on Wall Street is that the Fed will cut its main interest rate for the first time this year.
A report on Thursday indicated an increase in US workers applying for unemployment benefits last week, suggesting a rise in layoffs. This development adds to the growing concern over the job market, which has seen a slowdown in hiring. The labour market, which had appeared to be stabilizing, now faces the possibility of tightening further due to increased layoffs.
“Right now, inflation is a key subplot, but the labour market is still the main story,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
Inflation and Federal Reserve’s Dilemma
The Federal Reserve faces a complex decision-making process as it balances inflation concerns with a slowing job market. Thursday’s inflation report showed that consumer prices for food, petrol, and other living costs were 2.9 percent higher in August compared to the previous year, a slight increase from July’s 2.7 percent rate. Although this exceeds the Fed’s 2 percent target, traders believe it is not significant enough to shift the Fed’s focus away from the job market.
The Fed has been cautious about cutting interest rates throughout 2025 due to concerns that President Donald Trump’s tariffs could exacerbate inflation. Lower interest rates can potentially drive inflation higher, complicating the Fed’s efforts to manage the economy. The central bank has just one tool—interest rate adjustments—to address both inflation and employment issues, making its task particularly challenging.
Market Reactions and Corporate Movements
In corporate news, Warner Bros. Discovery saw a remarkable surge of 37.3 percent following reports that Paramount Skydance is considering an acquisition offer. Paramount Skydance itself jumped 15.6 percent, reflecting investor optimism. On the other hand, Oracle’s shares fell by 6.2 percent, though this was a minor setback compared to its previous day’s 36 percent surge, driven by excitement over new multibillion-dollar contracts related to artificial intelligence technology.
The Australian dollar was trading at US66.58¢ at 12.18pm AEST, reflecting the broader economic trends and currency market dynamics.
As markets continue to respond to economic indicators and corporate developments, investors will closely watch the Federal Reserve’s upcoming meeting for further guidance on interest rates and economic policy.
