ASX jumps higher after Fed chief sparks Wall Street rally; $A leaps

By Billie Eder

Australia’s sharemarket opened higher on Thursday after stocks in the US surged following Jerome Powell indicating the Fed is likely to slow the pace of interest rate rises.

The S&P/ASX200 had gained 74.20 points, or 1.02 per cent to 7358.40 at 10:15am AEDT, setting a new 100-day high as materials continue to lift the index up.

Gold miners were some of the indexes early risers, with Morning Star Resources jumping 4.6 per cent along with Newcrest Mining which was up 3 per cent.

Markets surged after Jerome Powell’s speech.
Markets surged after Jerome Powell’s speech. Credit:afr

The energy sector has had a sluggish start to the day, with Woodside down 1.7 per cent as investors wait to hear whether the government will somehow intervene in rising energy prices.

All four big banks were up marginally in early trading after flip-flopping between negative and positive territory this week, the best performer of which was the Commonwealth Bank, up 0.5 per cent.

Medibank hackers have released a massive data file overnight which contains more sensitive customer data, however their shares didn’t seem to be affected by the latest release, up 1.2 per cent on Thursday morning.

Overnight Wall Street was trading in negative territory for much of the session, but the S&P 500 soared late to close 3.1 per cent higher while the Dow Jones jumped by 2.1 per cent and the Nasdaq surged by 4.4 per cent.

The Australian dollar soared as the greenback weakened. At 10:20am AEDT, the Aussie is fetching 67.95 US cents, a jump of 1.6 per cent.


“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said in the text of his speech. “Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level.”

Powell also said rates are likely to reach a “somewhat higher” level than officials estimated in September, when the median projection was for 4.6 per cent next year. Those projections will be updated at the December meeting.

“This rally is a nonsense: Powell said they will slow down, but that rates will have to go higher than forecasted earlier,” said Milan-based market veteran Roberto Bagnato at Immobiliare Quadronno Srl. “The market wants to listen only to the first part of Powell’s statement.”

Officials have signalled they plan to raise their benchmark rate by 50 basis points at their final meeting of the year on December 13-14, after four successive 75 basis-point hikes which have lifted it to a 3.75 per cent to 4 per cent target range.

The economy has been slowing, but contains strong pockets that have given markets hope that a recession could be avoided. The government on Wednesday said the economy grew at a 2.9 per cent annual rate from July through September, an upgrade from its initial estimate.

Ahead of Powell’s remarks, Fed Governor Lisa Cook said it would be prudent for the central bank to make smaller hikes as it determines how high it will need to go to tame price gains.

Traders also scoured several economic reports, with key gauges of US activity painting a mixed third-quarter picture. Job openings fell in October — a hopeful sign for the Fed as it seeks to curb demand.

The figures precede Friday’s jobs report, which is currently forecast to show employers added 200,000 workers to payrolls in November. Economists are expecting the unemployment rate to hold at 3.7 per cent, and for average hourly earnings to moderate.

“You’re still not in a recession yet, but growth is slowing, and you’re just seeing this volatility of trying to price this in. It’s a challenge,” Matt Miskin, co-chief investment strategist at John Hancock Investment Management, said at Bloomberg’s New York headquarters.

“It’s like a traffic light going red-green, red-green.”

with Bloomberg, AP

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