ASX opens sharply higher after Wall Street gains

By Najma Sambul
Updated

The Australian sharemarket has jumped in early trade on Tuesday after a solid lead from Wall Street, with traders making their final moves in anticipation of a report that could show whether inflation is cooling in the right way or setting the market up for worse pain.

The S&P/ASX200 gained 44.40 points, or 0.6 per cent, to 7,462.20 at 10.15 am AEDT, with the tech, energy, consumer discretionary and finance sectors leading the surge. Overnight, the S&P 500 rose 1.1 per cent, the Dow Jones added 1.1 per cent and the Nasdaq composite closed 1.5 per cent higher.

Wall Street closed sharply higher to kick off the week.
Wall Street closed sharply higher to kick off the week. Credit:Bloomberg

Wisetech global and Carsales.com were both up 1.79 and 1.63 per cent, respectively in early trade on the ASX. Big banks CBA, NAB, ANZ, and Westpac all opened higher after Monday’s losses.

Miners Rio Tinto, BHP, and Fortescue were also in the green with slight gains at the open.

Meanwhile, Lynas Rare Earths shares recovered a little this morning after it confirmed that Malaysia’s Atomic Energy Licensing Board has renewed its licence to operate in the country for another 3 years from March 2.

The licence still includes onerous conditions, like the need to move all craving and leaching operations offshore by July 1. Lynas is still appealing to the Malaysian government to remove these conditions. If unsuccessful, Lynas faces disruption if its Kalgoorlie plant is not ready to handle cracking and leaching by July 1.

Manufacturing company James Hardie Industries shares took a dive, losing 7.12 per cent in morning trade, after the company announced it would cut annual profit review in their North America market for a third time.

Oil and gas giant Santos has written down the value of some of its oil and gas production and exploration assets by approximately $US320 million following a review of its reserves.

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High inflation and the Federal Reserve’s response to it with higher interest rates have been at the centre of Wall Street’s sharp moves for more than a year. The Fed has aggressively hiked rates to their highest level since the dawn of the Great Recession to drive down the worst inflation in generations. High rates can stamp out inflation, but they do so at the risk of sending the economy into a sharp recession and dragging on investment prices.

Economists expect the report to show inflation slowed to 6.2 per cent in January. That would be down from 6.5 per cent a month before and from a peak of more than 9 per cent in the summer.

All the worries about inflation and rates are happening against the backdrop of a decidedly lacklustre earnings reporting season. Companies in the S&P 500 are on track to report a nearly 5 per cent drop in earnings for the final three months of 2022, compared with a year earlier, according to FactSet.

By the count of strategists at Credit Suisse, this is shaping up to be the worst earnings reporting season outside of a recession in 24 years.

Pessimism is also building about earnings for the first three months of 2023, with forecasts coming down.

A continued decline in corporate earnings is one of the reasons strategists at Morgan Stanley are cautious about the rally stocks have made since the start of the year, even if they gave some back last week. The S&P 500 is up around 8 per cent for 2023 so far, though it remains stuck in its “bear market” after falling more than 20 per cent from its high last year.

“Price action is not reflective of the deteriorating fundamentals or the fact that the Fed is hiking during an earnings recession — drivers that should ultimately determine the lows for this bear market later this spring,” the strategists led by Michael Wilson wrote in a report. “Risk-reward is as poor as it’s been in our view.”

With AP

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Source: Thanks smh.com