Australian shares reversed course to trade sharply higher on Wednesday, as a key inflation print for November boosted hopes for a rate cut in February.
The S&P/ASX 200 index rose as much as 0.9% to 8,356.1 points as of 0315 GMT, after having dropped 0.3% earlier in the day.
Australia’s closely watched underlying inflation measure slowed to 3.2% in November from 3.5% in the prior month, data from the Australian Bureau of Statistics showed.
“Today’s inflation data has seen money markets price in the probability of a rate cut in February to 76% chance, with a now expected 3 cuts for calendar year 2025 or 75 basis points total,” said Jesse Moors, portfolio manager at Spatium Capital.
The Reserve Bank of Australia has held the cash rate at 4.35% for the past 14 months as it looks for evidence that inflation is heading back to its target band.
Investors are awaiting the Feb. 17-18 board meeting of the local central bank. Cooling inflation and expectations of an imminent interest rate cut propelled banks by 1.3% with all the “Big Four” lenders trading in the green.
Commonwealth Bank of Australia, the country’s largest, added 1.7%.
Australian shares fall as miners offset real estate and healthcare gains
“While a lower interest rate environment pressures the banks’ margins, the outlook for increased lending provides tailwinds for the banks in the next stage of the economic cycle,” said Grady Wulff, market analyst at Bell Direct.
Mining stocks gained 1.4%, snapping a three-session losing streak, with sector majors BHP Group and Rio Tinto rising 1.7% and 1.4%, respectively.
US stocks tumbled on Tuesday after a batch of upbeat economic data raised concerns that an inflation rebound could slow down the Federal Reserve’s pace of monetary policy easing.
Technology stocks in Sydney tracked their US peers to trade 0.9% lower, with ASX-shares of Block falling 3.6%.
New Zealand’s benchmark S&P/NZX 50 index was trading more or less unchanged.
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