The latecomers:
Packaging company Amcor fell 1.8 percent as consumer staples (down 0.4 percent) weighed on the index. Lithium and tantalum producer Pilbara Minerals and lithium chemical company Allkem were the biggest losers, shedding 3.9% and 2% at the close.
Hotels, alcohol and gaming company Endeavor Group fell 1.9 percent despite broad gains in the consumer discretionary sector.
The bass:
FP Markets APAC CEO Nick Twidale said the week had generally been a positive run for Australian shares and he was not surprised by Friday’s market moves.
“It’s been the first decent week in a long time,” he said. “Australian and Asian markets followed the US, where CPI data showed the first month-on-month contraction in inflation for more than a year.”
US CPI data for December showed that annual inflation had fallen from 7.1% in November to 6.5%.
Wall Street closed higher Thursday on the news, which Twidale said was the result of data suggesting a slowdown in U.S. markets and rising hopes that the Federal Reserve may ease the economy through smaller increases in interest rates.
“The data has encouraged investors to think that the Federal Reserve may become less brutal and not tighten rates as much as they did a couple of months ago,” he said.
The S&P 500 gained 13.6 points, or 0.3%, to 3,983.2.
“While we can safely say that we have passed peak inflation, it is too early to claim victory in the battle against higher inflation.”
Gargi Chaudhuri, Head of Investment Strategy, iShares, Americas.
The Australian dollar also hit new highs on Friday, settling just below an exchange rate of 70 US cents.
Twidale said the Australian dollar was a big risk indicator and was likely to break the 70 cent mark shortly. “It’s an export and commodity currency, so when things go well, it’s going to go up,” he said.
While most of the important data for the month has already been released outside the US, Twidale said he would be keeping an eye on producer price index data on Friday night. “The CPI is more influential, but the PPI could help confirm inflation readings,” he said.
While the CPI inflation data was clearly encouraging, stocks had already rallied earlier in anticipation of exactly that data. The figures were in line with forecasts on many points, and analysts warned investors not to get carried away by them.
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Although the central bank has been adamant that it does not see rate cuts coming until 2024, traders have become increasingly convinced that the Fed will reduce the size of its next rate hike, forecasting an increase of just 0.25 percentage points next month.
But analysts warned there could be bigger changes yet to come for markets as the impact of higher rates trickles down. They also cautioned investors not to think of slower rate hikes or an imminent halt in hikes as the same as interest rate cuts, which some investors expect could happen by the end of the year. These cuts can act as rocket fuel for the markets.
“While we can safely say we are past peak inflation, it is too early to claim victory in the battle against higher inflation,” said Gargi Chaudhuri, head of IShares Investment Strategy, Americas.
Earnings reporting season will begin in earnest on Friday, with JPMorgan Chase and UnitedHealth Group among the day’s headlines. A big concern on Wall Street is that high inflation and a slowing global economy are eating into the profits of big companies.
Tweet of the day:
Quote of the day:
“Amazon has weathered uncertain and difficult economies in the past, and we will continue to do so,” said Amazon’s regular chief, Andy Jassy, after the company said last week it would lay off 18,000 workers.
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With AP