Australian shares closed at a one-week high on Wednesday, led by gains in miners, joining a global rally as a softer-than-expected US inflation data raised hopes that the Federal Reserve could soften its interest rate hike stance.

The S&P/ASX 200 index ended up 0.7% at 7,251.30.

It climbed 0.3% on Tuesday. Consumer inflation in the United States rose less than expected for a second straight month in November, bringing the spotlight back on the Fed’s decision later in the day amid expectations that it will raise rates by 50 basis points.

Analysts at Australia’s third largest bank Westpac, however, said markets were jumping the gun in presuming the end of the tightening cycle is near.

“There is still more tightening to come, and even once this is done we expect central banks to signal a strong commitment to lowering inflation permanently.

This is likely to see policy remain highly restrictive for longer than markets currently anticipate.“

Australian shares track Wall Street higher, focus on US inflation data

Westpac analysts expect the Australian economy to “stall over the second half of 2023” due to a slowdown in consumer spending, drag on incomes from rising interest rates, and lingering property market weakness.

Miners advanced 1%, with gold miners jumping 2.4% as bullion prices hit a more than five-month high on Tuesday. Newcrest Mining and Northern Star Resources gained 2.2% and 1.3%, respectively.

The country’s No. 2 internet services provider TPG Telecom fell as much as 5.3% over an incident of unauthorised access to an exchange service that hosts email accounts of up to 15,000 business customers.

In New Zealand, the benchmark S&P/NZX 50 index ended 0.1% lower at 11,585.00.

The government has forecast the country would enter a recession in 2023, even as the budget remained on target to move into surplus for the 2024/25 financial year.