Australian shares have risen sharply, driven by financial, technology and energy stocks, after Wall Street rebounded from an initial sell-off triggered by red-hot US inflation data.
Key points:
- The ASX 200 has lost more than 10 per cent since the year began
- Overnight, all three major Wall Street indices ended sharply higher
- The pan-European STOXX 600 index gained 0.9 per cent
The ASX 200 closed up 116 points or 1.8 per cent to 6,759.
By 4:05pm AEDT, the Australian dollar was up at 63.28 US cents.
It recovered from a huge drop on Thursday night, falling towards 61.70 US cents, the lowest level since 2020, following the stronger-than-expected US inflation report.
All sectors finished the session in the green, with energy (+3.7pc) and utility (+3.5pc) stocks leading the gains.
Virgin Money was the top gainer on the benchmark stock index with a rise of 9.5 per cent.
Financials advanced 1.6 per cent, with the country's "big four" banks up between 0.4 per cent and 1.9 per cent.
Energy stocks jumped 3.8 per cent on the back of higher oil prices. Woodside Energy and Santos rose 4 per cent and 4.4 per cent, respectively.
Technology stocks rose 1.7 per cent, the best session since early October, tracking strong gains on the tech-heavy Nasdaq Composite index.
Miners advanced 1.2 per cent despite a slump in iron ore prices. Heavyweights BHP, Fortescue and Rio Tinto added between 0.7 per cent and 2 per cent.
Gold stocks, however, lost 1.3 per cent, with Newcrest Mining and Northern Star Resources shedding 1.2 per cent and 1.9 per cent, respectively.
Meanwhile, Qantas jumped 3.2 per cent after the airline surprised markets with a stronger-than-expected profit forecast and multiple brokerages raised their price targets.
On Friday, Insurance Australia Group requested a trading halt after the High Court rejected further pandemic insurance appeals.
The company said in a statement that the trading halt enabled it to "consider the impact of a ruling by the High Court of Australia to dismiss the applications by IAG and the policyholders for special leave to appeal the judgement of the Full Federal Court of Australia in the second business interruption test case handed down on 21 February 2022".
That judgement was seen as bad news for small businesses awaiting an insurance payout.
The company said its shares would be suspended from trading until it made an announcement in relation to the financial impact of the High Court determination.
Wall Street's dramatic comeback
Traders reversed course after initially flipping to safety mode when the US Labor Department's consumer prices index (CPI) report showed headline CPI gaining 8.2 per cent annually as rents surged by the most since 1990 and food prices rose. Core CPI, which excludes food and fuel prices, beat forecasts at 6.6 per cent.
After Thursday's inflation data, traders were betting that the Fed would raise interest rates sharply in three weeks' time and ultimately lift rates to 4.75-5 per cent by early next year.
The US dollar fell against most currencies as investors ended up taking the opposite approach to the market's initial response to the data.
On Wall Street, the S&P 500 closed the session up 2.6 per cent after declining 5.7 per cent in the previous six sessions. Earlier Thursday it fell 2.3 per cent to its lowest level since November 2020.
"When you have that big of a shock that it moves that fast, it's not unusual for it to get a little bit overdone. That might actually be a good sign we're not seeing follow-on selling," said Shawn Cruz, head trading strategist at TD Ameritrade in Chicago, referring to stock index moves.
While the data implies that the Fed will continue with sizeable rate hikes, Mr Cruz said the market retracement "gives a sense there's a large enough pool of investors out there who weren't caught off guard ... that maybe we are getting down to levels, where a lot of the pessimism is already priced in."
The Dow Jones Industrial Average rose 827.87 points, or 2.83 per cent, to 30,038.72, the S&P 500 gained 92.88 points, or 2.60 per cent, to 3,669.91 and the Nasdaq Composite added 232.05 points, or 2.23 per cent, to 10,649.15.
'Prices are still too high': Biden
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.
"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.
BoE reassures emergency bond market support deadline
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 flat, trading at $US94.62 a barrel, by 4:04pm AEDT.
ABC/Reuters