Energy, materials drive ASX higher after Wall Street rises
By Millie Muroi
The Australian sharemarket lifted on the back of energy and materials companies gaining on Tuesday after Wall Street found its feet overnight.
The S&P/ASX 200 was up 39.9 points, or 0.6 per cent, to 7,264.7 about midday, even as several companies swung to a loss in their latest earnings reports.
Lynas Rare Earths (up 3.5 per cent), BlueScope Steel (up 3.3 per cent) and Mercury NZ (up 3.2 per cent) led gains. The energy sector rebounded from Monday’s losses, adding 1.2 per cent, while the materials sector extended its gains, climbing 1.3 per cent. Heavyweight Fortescue Metals (up 2.3 per cent) was among the biggest large-cap climbers, while BHP gained 0.9 per cent.
Harvey Norman shed 12.3 per cent after its profits and sales slipped in the six months to December, with consumers tightening their belts amid rising cost-of-living pressures. Biotechnology company Mesoblast and data centre business NextDC also swung to losses in the December half.
On Wall Street, stocks steadied themselves overnight following their worst week since early December.
The S&P 500 rose 0.3 per cent to 3,982.24 for just its second gain in the last seven days. The Dow Jones gained 0.2 per cent while the Nasdaq composite climbed by 0.6 per cent. The S&P/ASX 200 shed 1.1 per cent on Monday.
Stocks have struggled in February after a strong start to the year as reports have shown inflation and much of the overall economy are staying more resilient than expected. While the strong economic data calms fears that a recession may be imminent, it also has forced Wall Street to raise its forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there.
High rates can drive down inflation, but they also raise the risk of a recession in the future because they slow the economy. They also hurt prices for stocks and other investments.
The heightened expectations for rates have been most evident in the bond market, where yields have shot higher in recent weeks. On Monday, the yield on the 10-year Treasury slunk back a bit, which eased some of the pressure on stocks.
Economists have been expecting more softness in the economy after the Fed jacked up rates last year at the fastest pace in decades. But reports on everything from the job market to spending by consumers to inflation itself have been coming in firmer than expected over the last few weeks.
The fear is that if the economy stays on strong footing, it could feed into upward pressure on inflation. That’s why expectations on Wall Street have swung so hard, from earlier thinking the Fed could soon take it easier on interest rates to now believing it could raise them above 5.25 per cent.
The Fed’s key overnight rate is now in a range of 4.50 per cent to 4.75 per cent, up from virtually zero at the start of last year.
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Source: Thanks smh.com