The Australian sharemarket experienced a robust start to the day, mirroring gains seen on Wall Street. Investors returned to the market following strong quarterly company results and encouraging signs of a resilient US economy, which bolstered investor sentiment. As of 10:56 am AEDT, the S&P/ASX 200 had climbed 51.4 points, or 0.6 percent, reaching 8853.40. This rise was largely driven by mining stocks, buoyed by an overnight increase in gold prices.
Tech stocks also saw a resurgence, recovering from Wednesday’s losses that had previously pushed the ASX down by 0.1 percent. Meanwhile, the Australian dollar was trading at $US65.10¢ at 10:58 am AEDT.
Banking Sector and Market Movers
NAB shares fell by 1.1 percent after the country’s largest business lender reported a slight 0.2 percent decline in cash profits for the year ending September. This was attributed to higher charges for bad loans in its business bank and rising expenses. Among the other major banks, performances were mixed. Westpac saw a 1.7 percent drop following a 1 percent fall in full-year profits to $6.9 billion, while the Commonwealth Bank and ANZ Bank rose by 0.9 percent and 0.6 percent, respectively.
James Hardie experienced a dramatic 9.4 percent plunge in the first 15 minutes of trading before the company halted its stock pending an announcement. Materials emerged as the strongest sector early in the session, with iron ore heavyweights BHP, Fortescue, and Rio Tinto rebounding from previous losses, rising 1.1 percent, 0.8 percent, and 1.3 percent, respectively.
Tech and Gaming Stocks Rally
Tech stocks showed strength in an about-turn from the previous day’s global market sell-off. Software companies WiseTech Global and Technology One saw increases of 2.8 percent and 0.6 percent, respectively, while Life360, a family member tracking app, rose by 2.1 percent. In the gaming sector, Light & Wonder surged by 9.8 percent, positively impacting its larger rival Aristocrat, which rose by 1.8 percent. This came after Light & Wonder reported a 78 percent surge in third-quarter profits, driven by increased gaming unit installations in North America and record sales in its iGaming business.
Wall Street’s Influence and Economic Indicators
The rise on the local bourse followed a rebound on Wall Street, where the S&P 500 rose by 0.4 percent, the Dow Jones gained 0.5 percent, and the Nasdaq composite increased by 0.7 percent. This recovery came after a pullback on Tuesday that raised concerns about the market’s potential overvaluation. Investors returned as US companies reported strong quarterly earnings and positive private economic data.
“For investors with cash on the sidelines, the recent market pullback seems like a good time to buy, especially for investors with a longer time horizon,” said Robert Edwards at Edwards Asset Management. “Earnings are crushing it and growing faster than revenues, and that often leads to multiple expansion.”
Several major companies contributed to the market’s uplift. Alphabet, Google’s parent company, jumped 2.4 percent, while McDonald’s rose 2.2 percent, benefiting from the return of its popular Snack Wraps. International Flavours & Fragrances surged 4.1 percent after exceeding Wall Street’s quarterly profit forecasts.
Challenges and Economic Outlook
Despite the positive earnings reports, some companies faced challenges. Taser maker Axon Enterprise fell by 9.4 percent after projecting weaker profits than analysts had expected. Live Nation Entertainment dropped 10.6 percent following results that fell short of forecasts. The latest earnings season provides crucial insights into consumer and business behavior amid a government shutdown, which has halted important monthly updates on inflation and employment.
“The survey provides a reassuring sign that economic growth persisted in October despite the government shutdown,” Bill Adams, chief economist for Comerica Bank, noted.
Private economic updates continue to offer valuable insights. A report from ADP showed that private payrolls rose more than anticipated in October, offering a partial glimpse into the US job market. The services sector, the largest component of the US economy, expanded more than expected, according to the Institute for Supply Management.
The Federal Reserve faces a challenging environment with a weakening job market and persistent inflation. The central bank recently cut its benchmark rate for the second time this year to support the economy. However, further rate cuts remain uncertain as inflation concerns persist.
“For Fed watchers, this ADP report should make it clear that a December rate cut is now in play,” said Jamie Cox, managing partner for Harris Financial Group. “We are nearing stall speed in the labour market, and that will get the Fed’s attention.”
Wall Street has adjusted its expectations for another interest rate cut in December, with investors now forecasting a 65 percent chance of a cut, down from a previous 90 percent likelihood.
