ASX 200 Rallies as Rate Hike Fears Ease

The S&P/ASX 200 surged 125 points, or 1.5%, to 8,622 on Thursday, swinging from the prior session’s losses with broad-based gains led by electronic tech, non-energy minerals, transport, and financials. Sentiment firmed as April’s unexpected employment decline in Australia bolstered hopes that the central bank could pause its tightening cycle. Meanwhile, flash PMI showed factory activity still expanding in May despite softening from April. Wall Street’s bullish momentum on Wednesday added further support, with optimism over a potential U.S.–Iran peace deal tempering inflation and rate fears. However, caution emerged ahead of April domestic CPI due next week, after March prices surged 4.6% yoy, the fastest since September 2023, driven by higher fuel costs amid the Middle East conflict. The big four banks rose between 0.9% to 2.3%. Other notable movers were BHP Group (3.1%), Evolution Mining (3.8%), Brambles (3.5%), and Bluescope Steel Ltd. (2.3%).

Australian stocks jumped 145 points, or 1.7%, to 8,641 by midday Thursday, rebounding from the prior session’s weakness. The rally tracked an overnight Wall Street rally after U.S. President Trump said Washington was in the “final stages” of negotiations with Iran, according to a pool report, boosting investor optimism. Locally, inflation expectations eased in May after hitting an over three-year high in April. Meanwhile, flash data on Australia's factory activity showed a continued growth in May despite the reading softening from April. However, strength was capped by domestic labor market data indicating the highest jobless rate in over four years in April, with employment falling for the first time since November. Gains were almost broad-based, led by electronic tech, financials, producer manufacturing, and logistics. Among standouts were Mineral Resources (4.3%), Qantas Airways (3.8%), BHP Group (3.2%), and Evolution Mining (3.0%). The four major banks climbed between 1.1% to 2.4%.

The S&P/ASX 200 dipped 108 points, or 1.3%, to finish at 8,497 on Wednesday, erasing prior gains as U.S. equity futures retreated amid renewed Middle East tensions and inflation worries. Local caution deepened after the central bank projected underlying inflation above 3% until late 2027, easing to the midpoint only by mid-2028. Still, losses were tempered by China's decision to hold key lending rates at record lows for a 12th straight month, with policymakers pledging “supportive” and “moderately loose” settings after Q1 GDP grew 5%, hitting the top of the government’s 4.5–5% target. Sector weakness was broad, led by non-energy minerals, transport, financials, and process industries. Among notable laggards were Evolution Mining (-5.2%), Brambles Ltd. (-4.8%), REA Group (-2.2%), and Origin Energy (-2.0%). The four big banks dropped between 0.7% to 2.5%. Traders now brace for Australia's PMI readings for May and April job data, set to be released on Thursday.