Australian shares posted solid gains on Tuesday, easing traders’ fears following a rough start to the year.
Following a four-session slide, the benchmark S&P/ASX200 added 0.9 per cent, or 69 points, to reach 7,520.5, as all sectors bar energy finished in the green.
The broader All Ordinaries also climbed, adding 1 per cent to 7749.5.
IG market analyst Tony Sycamore said equities had benefited from a “stabilising session” after last week’s nervous start to the year.
“The big battle obviously lies ahead,” Mr Sycamore said.
“Markets will need to deal with the CPI figures in Australia and the US which are priced for disinflation to continue.”
Fresh inflation data, to be released by the Bureau of Statistics on Wednesday, will be closely scrutinised by investors for clues on the Reserve Bank’s next move. Photo by:NCA Newswire
Bets on rate cuts will be tested again on Wednesday, when the Bureau of Statistics releases its fresh monthly CPI print for November, which is expected to show a 4.5 per cent increase in headline inflation, down from 4.9 per cent in October.
“The risk going into these numbers would be a higher than expected inflation print,” Mr Sycamore added.
“If we were to get a harder core number, that would certainly disrupt the current narrative, and of course, take out some of those rate cuts which are currently priced in the market.”
Money markets are fully priced for a rate cut at the Reserve Bank’s August meeting.
Locally, tech stocks added 2.1 per cent following a 2.2 per cent rally in the Nasdaq overnight, its strongest session since November.
Xero added 3 per cent to $108.84, Wisetech climbed 2.1 per cent to $71.75 and Megaport rose 1.9 per cent to $8.67.
The big four banks all finished higher with NAB rallying 1.3 per cent to $30.90, Commonwealth Bank gaining 0.9 per cent to $113.02, Westpac adding 1 per cent to $23.10, and ANZ rising by 0.9 per cent to $25.89.
The benchmark benefited from a stronger than expected 2 per cent increase in retail sales during November, which were buoyed by the Black Friday sales. Markets were expecting turnover to rise by just 1.2 per cent.
Consumer discretionary stocks benefited from the strong retail report, adding 0.9 per cent. Domino’s Pizza climbed 2.3 per cent to $57.55 and JB Hi-Fi rose 1.9 per cent to $53.78.
Despite the upside surprise, economists said the outlook for monetary policy was unchanged.
“This result is unlikely to support a hike from the RBA in February,” ANZ senior economist Adelaide Timbrell said.
“Once strong population growth and rising prices of retail products are taken into account, the underlying trend for retail is still running relatively weakly.”
Energy stocks were the worst performers after oil prices lost ground on Monday as Saudi Arabia announced sharp price cuts and a rise in output by the OPEC+ cartel.
On Tuesday, crude oil prices retraced some of their earlier losses, with Brent crude above $US76 a barrel, while West Texas Intermediate was below $US71.
Sector heavyweights Woodside and Santos eased 0.4 per cent to $36.52 and 0.3 per cent to $7.57, respectively, while Karoon Energy slumped 1.7 per cent to $2.00.
In company news, Alumina soared 7.7 per cent to 98c after it was announced that operations at its Kwinana refinery, co-owned with US-based aluminium producer Alcoa, would cease.
Shares in engineering firm Worley were placed into a trading halt after an Ecuadorean tribunal found the company had acted in a corrupt manner.