The Australian sharemarket continued its upward trajectory in early trade today, buoyed by strong performances in IT stocks and gold miners. This rally follows significant gains on Wall Street, where technology stocks led the charge amid growing optimism that the Federal Reserve might cut interest rates in December.
As of 10:50 AM AEDT, the S&P/ASX 200 had risen by 15.30 points, or 0.2%, reaching 8540.40. Six out of eleven sectors were in positive territory, building on a 1.3% increase from the previous day. This comes after a challenging week for the local market. IG Market analyst Tony Sycamore commented, “I suspect with US rate cuts back in play, we may have seen a bit of a short-term low for our market.”
The Australian dollar was trading at US64.66¢ at the same time, reflecting the broader economic sentiment.
Technology and Gold Stocks Lead the Charge
Technology stocks emerged as the biggest winners in early trading, with the sector climbing 1.9%. This surge was inspired by the tech-heavy Nasdaq’s 2.7% jump overnight. Major players like Alphabet and Nvidia fueled the S&P 500’s 1.5% rise, marking one of its best performances since the northern hemisphere summer. The Dow Jones Industrial Average also saw a modest increase of 0.4%.
Australia’s leading tech stock, WiseTech Global, saw a 1.1% rise, while AI data centre operator Next DC climbed 2%. Shares of Life 360, a family member tracking app, surged 6%.
Gold miners contributed significantly to the mining sector’s strength. Northern Star increased by 2.2%, Evolution Mining by 3%, and Newmont by 4.8%, as spot gold prices rose on the back of expectations for another Fed rate cut.
Mixed Performances Across Other Sectors
Iron ore heavyweights Rio Tinto and BHP saw gains of 2.2% and 0.6%, respectively, following BHP’s recent decision to abandon its pursuit of Anglo American’s copper assets. In contrast, Fortescue Metals experienced a slight decline of 0.6%.
Healthcare stocks also performed well, bolstered by an 11.5% rally in Ramsay Health Care after the company reported a 5.8% increase in earnings before interest and tax for its first financial quarter. CSL, Australia’s largest healthcare stock, rose 0.9%, while Sigma Healthcare added 1%.
However, banking stocks, which constitute a third of the ASX, were trading lower. CBA, Westpac, and National Australia Bank all saw declines, while ANZ Bank remained flat. Regional lender Bendigo and Adelaide Bank faced a significant setback, dropping 6.2% after revealing issues in its anti-money laundering and terrorism financing risk management, prompting an investigation by Deloitte.
Wall Street’s Influence and Future Outlook
In New York, Wall Street’s optimism was fueled by hopes of a Federal Reserve rate cut at its next meeting, which could stimulate the global economy and boost investment prices. The market also benefited from the ongoing enthusiasm for stocks involved in the artificial intelligence sector. Alphabet’s 6.3% rally, driven by its new Gemini AI model, and Nvidia’s 2.1% rise were key contributors to the S&P 500’s strength.
Despite recent volatility, the S&P 500 remains within 2.7% of its record high set last month. Anthony Saglimbene, Ameriprise chief market strategist, noted, “It’s reasonable to expect that stocks will experience periods of pressure from time to time, which, historically, is quite healthy for longer-term strength.”
Looking ahead, the market faces several tests, including the upcoming US government data on wholesale inflation. Economists predict a 2.6% year-on-year rise, mirroring August’s rate. A higher reading could deter the Fed from implementing a December rate cut, as lower rates can exacerbate inflation. Some Federal Reserve officials have already expressed reservations about a December cut due to persistent inflation above the 2% target.
Traders are betting on a 79% probability of a Fed rate cut next month, up from 71% last Friday, according to CME Group.
Federal Reserve Governor Christopher Waller and New York Fed President John Williams have both hinted at the possibility of a near-term rate cut, further fueling market optimism.
As Wall Street prepares for the Thanksgiving holiday, attention will soon shift to the consumer spending frenzy of Black Friday and Cyber Monday. Meanwhile, Bitcoin continues its volatile trajectory, trading near $US88,900 after fluctuating between $US82,000 and $US94,000 over the past week.
