ASX to jump as Wall Street rallies, US inflation rise to a 40-year high

The ASX 200 was up 7.5 points or 0.1 per cent to 6,799 at 10:14am AEST. (ABC News: John Gunn) © Provided by ABC Business The ASX 200 was up 7.5 points or 0.1 per cent to 6,799 at 10:14am AEST. (ABC News: John Gunn)

Australian shares are expected to start the day higher as Wall Street rallied after hot US inflation data.

ASX futures were up 110 points or 1.7 per cent to 6,745 at 6:55am AEDT.

At the same time, the Australian dollar was up at 62.96 US cents.

US stocks ended sharply higher on Thursday as investors pulled back from bearish bets after a disappointing consumer prices report.

Energy and financials led gains among S&P sectors.

Markets were sharply lower earlier in the day after the headline consumer price index rose at an annual pace of 8.2 per cent in September, compared with an estimated 8.1 per cent rise, bolstering the case for a fourth straight 75 basis point rate hike from the Fed next month.

Core CPI, which excludes volatile food and fuel prices, gained 6.6 per cent last month, compared with estimates of a 6.5 per cent rise. The reading was higher than a 6.3 per cent rise in August.

“People were perhaps net short going into the CPI report, and saw the report being negative and started covering their shorts,” said King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco.

President Joe Biden and other officials on Thursday sought to balance demonstrating empathy with American families struggling to pay bills and boasting about other elements of the US economy, such as a strong job market.

“Americans are squeezed by the cost of living: that’s been true for years, and they didn’t need today’s report to tell them that,” Mr Biden said in a statement.

Mr Biden said the consumer price index shows some progress in the fight against higher prices but there is more work to do.

The White House noted that inflation over the last three months has averaged 2 per cent at an annualised rate, down from 11 per cent in the prior quarter.

The rise was driven by soaring rents and food costs and reinforces the expectation that the Federal Reserve will deliver a fourth 75-basis-point interest rate hike next month.

“But even with this progress, prices are still too high. Fighting the global inflation that is affecting countries around the world and working families here at home is my top priority,” Mr Biden said.

Some strategists also pointed to some technical support levels around the 3,500 mark for the S&P 500.

According to preliminary data, the S&P 500 gained 92.38 points, or 2.58 per cent, to end at 3,669.41 points, while the Nasdaq Composite gained 227.30 points, or 2.18 per cent, to 10,644.40. The Dow Jones Industrial Average rose 829.08 points, or 2.84 per cent, to 30,039.93.

“It’s technical factors,” Lip said, adding that the recent steep sell-off in stocks may mean “bad news may have already been discounted”.

“Going into earnings season, all we really need is things to be not as bad as suspected,” he said.

Big Wall Street banks kick off third-quarter reporting season on Friday, with investors awaiting to see how a high interest-rate environment affects their profits.

On Thursday, European stocks climbed, rebounding from a near two-year low touched earlier in the session after hot US inflation data spurred bets of aggressive interest rate hikes from the Federal Reserve.

The region-wide STOXX 600 index shuttled between positive and negative territory throughout the session before closing up 0.9 per cent and snapping a six-day losing streak.

The Bank of England has insisted that its emergency bond market support will expire on Friday as originally announced, countering media reports of continued aid if necessary.

While crude oil was having a volatile session the commodity was most recently rallying as low levels of diesel inventory ahead of winter helped investors shrug off higher-than-expected stocks of crude and gasoline.

Brent crude oil was up, trading at $US78.99 a barrel, by 07:20am AEST.


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