It is likely to be another volatile day for the ASX, with ASX 200 futures up just 4 points, or 0.1%, to 8,486 points after US trading finished.
The ASX 200 closed 51 points, or 0.06%, higher yesterday at 8,535, with gains led by the Industrials (+0.98%), Financials (+1.41%) and Consumer Staples (+1.08%) sectors. The IT (-1.05%), Materials (-0.42%) and Health Care (-0.25%) sectors were the main laggards.
Despite a shaky start, the index stabilised before gaining momentum in a steady rally, finishing just 31.6 points below its record high of 8,566.9 set on the final trading day of January.
“The driver of the rally was solid earnings reports from companies, including CBA, which reported a net profit after tax of $5.13 billion for 1H 2025, sending its share price 2.36% higher on the day to a fresh record high of $165.98,” IG Markets analyst Tony Sycamore noted.
“Elsewhere, Computershare surged 15.49% to $41.53 after it reported its profit increased by 25% to $286.5 million, which was accompanied by bullish guidance and a 13% lift in its dividend.
"Today sees earnings reports from companies including Temple and Webster, ASX, Domain, IAG, South 32 and Treasury Wine Estates.
“The Australian interest rate is pricing in 21bp of rate cuts for next week's RBA Board meeting. A total of 70bp of RBA rate cuts are priced for 2025, down from 85bp this time last week.”
US markets mixed
US stocks closed mostly lower overnight as a stronger-than-expected January Consumer Price Index (CPI) report reignited inflation concerns, dampening expectations for multiple interest rate cuts by the US Federal Reserve this year.
Headline inflation rose 0.5% month-on-month (MoM) in January, exceeding the 0.3% forecast and marking the largest monthly increase since August 2023. On an annual basis, inflation climbed 3.0%, above the 2.9% expected.
Core inflation, which excludes volatile food and energy prices, increased 0.4% MoM, outpacing the 0.3% estimate and recording its fastest gain since March 2023. Annually, core inflation edged up to 3.3% from 3.2% in December.
The data follows last week’s unexpected jump in year-ahead consumer inflation expectations to 4.3% from 3.3%. It also precedes an announcement from former President Donald Trump on reciprocal tariffs against nations imposing levies on US exports, a move expected to add further inflationary pressure.
“The US rates market now prices in only 28 basis points of easings, or one 25bp rate cut this year, down from the two 25bp rate cuts that were priced this time last week,” Sycamore said.
“Now, a word of warning. At the start of the year, it is common for companies to push through 'one-off' price rises. These price rises tend to flow through into higher inflation readings in the first two or three months of the new year. As such, it is possible the market has overreacted to last night’s hotter-than-expected inflation reading for January as it did at the beginning of 2024.
“Looking ahead, market focus will shift to core PPI inflation, which feeds through into Core PCE inflation. The market is looking for the core measure to rise by 0.3% MoM, which would see the annual rate ease from 3.5% to 3.3%. In the stock space, earnings reports from Coinbase and Airbnb are set to drop after the bell tomorrow morning.”
Europe continues its highs
European sharemarkets hit fresh record highs, buoyed by corporate earnings despite investor caution over US inflation data and trade policies. The banking sector led gains with a 0.9% rise, driven by an 8.2% surge in ABN AMRO shares after the Dutch bank’s fourth-quarter results exceeded expectations.
- The pan-European FTSEurofirst 300 index edged up 0.1%.
- London’s FTSE 100 advanced 0.3%.
Currencies and commodities
Currencies
Currencies traded mixed against the US dollar in European and US sessions. The euro strengthened from US$1.0317 to US$1.0429 before settling near US$1.0385 at the US close.
- The Australian dollar rose from US$0.6236 to US$0.6304 before easing to US$0.6280.
- The Japanese yen weakened, slipping from JPY153.40 per US dollar to JPY154.79 before recovering slightly to JPY154.40 at the US close.
Commodities
Global oil prices declined by more than 2% on Wednesday after US crude inventories increased by 4.1 million barrels to 427.9 million barrels over the past week, exceeding analysts' expectations of a 3 million-barrel rise.
- Brent crude fell US$1.82, or 2.4%, to US$75.18 per barrel.
- US Nymex crude dropped US$1.95, or 2.7%, to US$71.37 per barrel.
Base metal prices showed a mixed performance.
- Copper futures rose 2.3% due to supply constraints, while aluminium futures declined 1.3% amid profit-taking and concerns over tariffs.
- Gold futures edged lower on Wednesday, slipping US$3.90, or 0.1%, to US$2,928.70 per ounce, remaining near record highs as traders assessed the latest US inflation data and comments from US Federal Reserve Chair Jerome Powell. Spot gold was trading around US$2,901 at the US close.
- Iron ore futures advanced US$0.94, or 0.9%, to US$107.26 per tonne, as investors turned their attention to potential supply disruptions from Australia and the prospect of rising demand in China, the world's largest consumer.
What about small caps?
The S&P/ASX Small Ordinaries (XSO) closed 0.86% down yesterday to 3,192.30. The index has lost 0.55% over the past five days.
It is a quiet morning so far on the newsfront, but you can read about the following and more throughout the day.
- Ora Banda Mining Ltd continues to advance exploration at the high-grade Riverina Gold Camp, with drilling confirming significant extensions to mineralisation. Deep drilling at Riverina Underground has intersected high-grade gold more than 300 metres below the current mine plan, reinforcing the continuity of mineralisation at depth. The extensional drilling program in the central area has also identified additional mineralised zones, which have been incorporated into the mine plan.
- Lindian Resources Ltd has received multiple funding enquiries over the past month to support the development of its Kangankunde Rare Earths Project in Malawi.
- Riversgold Ltd is set to resume drilling at its Northern Zone Gold Project, aiming to extend previously identified high-grade intercepts. The program will utilise SW-NE oriented extensional lines with 20-metre spacing. A drilling contractor has been secured and will mobilise to site in March 2025.
- Ionic Rare Earths Ltd has expanded its international strategy by signing a non-binding Memorandum of Understanding (MOU) with South Korea’s DNA Link, Inc. (KOSDAQ: 127120). The collaboration focuses on recycling rare earth permanent magnets and securing rare earth oxide (REO) supply.