Australian shares extended gains on Wednesday, tracking overnight strength on Wall Street, as bets of a less-aggressive rate hike by the US Federal Reserve trumped concerns over dismal outcome of domestic inflation print.
The S&P/ASX 200 index edged up 0.2%, after having risen 0.6% earlier in the day, to close at 6,810.90 points.
The benchmark closed 0.3% higher on Tuesday. Overnight US data showed slowing home price growth and souring consumer confidence.
Such signs of economic softness, ordinarily unsupportive of risk appetite, are evidence of abating Fed hawkishness.
However, that was not the case back home as surging costs of home building and gas pushed Australia’s consumer price index to a 32-year high last quarter, giving rise to concerns that the Reserve Bank of Australia (RBA) might opt for an oversized rate hike.
“Despite today’s inflation reading, the RBA is unlikely to go for more than a 25 bps rate hike next week because they must have factored in this high inflation print,” said Kunal Sawhney, chief executive officer at Kalkine Group.
“The cash rate hikes announced so far are yet to show their full impact on consumer behaviour and prices.
Australia shares edge higher on tech and banking boost; all eyes on annual budget
Stronger signs of a decline in inflation will probably emerge next year before the RBA goes for its first meeting of 2023 in February,“ he added.
Australian technology stocks traded flat, while financials inched 0.1% higher with the “Big Four” banks climbing between 0.2% and 0.5%.
Leading gains in the benchmark, gold stocks climbed 2.1% as an easing US dollar made greenback-priced bullion less expensive for overseas buyers.
Miners edged 0.3% higher, while energy stocks fell 1.4% as oil prices eased after data showed US stockpiles rose more than expected.
Medibank Private tumbled as much as 18.1% to post a its worst day, after the country’s biggest health insurer warned of a A$25 million ($15.96 million) to A$35 million hit to first-half earnings from costs related to a data breach.
New Zealand’s benchmark S&P/NZX 50 index rose 1.3% to finish the session at 11,046.50 points.
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