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The laggards

Mineral Resources led the laggards in the materials sector, down 4.6 per cent, followed by Fortescue (down 4.6 per cent). Iron ore rivals BHP and Rio Tinto both dropped, by 2.8 per cent and 2.6 per cent, respectively.

The iron ore price has declined ahead of data this week that’ll shed light on Chinese steel output, as mills in the biggest market battle slumping product prices and challenged domestic demand.

ASX Ltd, which runs the Australian bourse, dropped 3.7 per cent. Corporate watchdog ASIC is suing the company over allegedly making misleading statements about the replacement of its core trading system CHESS, when it claimed early last year that the botched project was “on-track for go-live” in April 2023 and was “progressing well”.

The lowdown

AMP chief economist Shane Oliver said the Australian market’s strong session followed one of Wall Street’s best days of the year overnight, with US inflation looking to be slowing enough to get the Federal Reserve to ease up on rates later this year. This was raising “prospects for lower global interest rates”.

“You can see fairly broad-based strength in sectors that will benefit from lower interest rates, like financials, property stocks, consumer stocks, telcos,” he said.

Earnings reports, including a “great result” from CBA, had also boosted the market, but with only around a quarter of results in so far, this was only a partial picture of the last financial year, Oliver explained.

“It’s also a tendency [of] companies with good results to report early on, and as the reporting season drifts on you tend to see some weaker results,” he said.

Adam Dawes, senior investment adviser at Shaw and Partners, said a dip in commodity prices, including iron ore, which temporarily dropped below $US100, had hurt the mining giants.

“Combination of iron ore weak, Aussie dollar strong – it’s not good for the materials sector today.”

He said the long-term effect of ASIC’s case on ASX Ltd’s share price would depend on the size of any potential fine if the stock exchange operator is found to have misled the market.

“But the proceedings in the Federal Court will take up a lot of headlines, and that will put some more pressure on the share price going forward,” he said.

The Australian dollar was buying just over US66¢ on Wednesday, while the Kiwi dollar fell from US60.8¢ to US60.2¢ after New Zealand’s Reserve Bank announced its first reduction of the cash rate since 2021, by quarter of a percentage point to 5.25 per cent.

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Oliver said the decision provided “relatively minor” support to the RBA’s case to cut rates.

“We do have inflation which has proved a bit more sticky than what New Zealand has seen lately,” he said.

In the US, the S&P 500 jumped 1.7 per cent for its third-best day of 2024 after the US government reported inflation at the wholesale level slowed last month by more than economists expected.

The Dow Jones rose 408 points, or 1 per cent, and the Nasdaq composite clambered 2.4 per cent higher.

High inflation has been the scourge of shoppers and financial markets for years. It finally looks to be slowing enough to get the Federal Reserve to ease up on interest rates, which the Fed has been keeping at economy-crunching high levels to stifle inflation.

Tweet of the day

Quote of the day

“Companies and market participants rely on what the ASX says about its operations to make their own decisions and investments.

“We expect the ASX to be a place to list and invest with confidence. When the ASX falls short, it has wide-ranging consequences across the market,” said ASIC chair Joe Longo about the corporate regulator’s Federal Court case against the stock exchange operator, the Australian Securities Exchange (ASX).

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with AP