Australian shares are set to open lower on Thursday, tracking a subdued session on Wall Street as investors paused after a fresh run of record highs in US equities.
Despite choppy trading conditions overnight, the S&P 500 and Nasdaq Composite still edged to new highs as falling oil prices eased inflation concerns and reduced pressure on households and businesses globally.
ASX closes stronger on softer inflation print
The Australian sharemarket rallied on Wednesday after April inflation data came in softer than expected, strengthening expectations the Reserve Bank of Australia (RBA) will remain on hold at its June meeting.
The S&P/ASX 200 closed up 59.9 points, or 0.7%, to 8,717.7, recovering from early weakness after the inflation figures were released. Ten of the benchmark’s 11 sectors finished higher.
Headline inflation slowed to 4.2% in April, below consensus forecasts of 4.4%, aided by a temporary reduction in fuel excise costs. The RBA’s preferred trimmed mean inflation gauge still rose to 3.4%.
Money markets responded by sharply reducing the likelihood of a June rate hike, now pricing only a 6% chance of another increase and just 0.20 percentage points of tightening for the remainder of 2026.
Josh Gilbert, Lead Analyst for APAC at eToro said, "April’s inflation data showed that Australia still has a battle with inflation and that the RBA has very little breathing room. Trimmed inflation ticked up to 3.4% from 3.3% last month and remains above the top of the RBA's 2-3% target band. With the cash rate already at 4.35% after three consecutive hikes this year, the board is caught between stubborn prices and a softening economy.
"The headline number came in at 4.2%, down from 4.6% in March and below estimates, but still well above target. The conflict-driven surge in fuel prices is doing real damage, feeding through to operating costs for businesses and squeezing household budgets as consumer confidence remains under immense pressure. Fuel eased in April after the government's excise cut, but at 23.5% above pre-conflict levels, Australians are still paying a heavy price at the pump. The cost is now embedded well beyond petrol, with building and logistics costs pushing higher too.
"The RBA meets again in June and is widely expected to hold at 4.35%. Today's print won't change that, but it does reinforce why we’ve seen three rate hikes and why another is still pencilled in this year. With trimmed inflation edging higher and the cost of the current conflict feeding deeper into supply chains, it’s an uncomfortable position for the RBA to be in, and shows the job is not done."
Technology stocks led gains as investors continued to back AI-related names. NextDC rose 3.8% to $15.20 while Megaport surged 8.6% to $14.98.
Mining stocks also strengthened as aluminium prices hit four-year highs and copper remained elevated. BHP gained 1.5% to $61.28 while South32 climbed 3.5% to $4.79.
Banks were mixed. Commonwealth Bank added 0.3% to $164.81 while ANZ slipped 0.3% to $35.57 and NAB fell 0.6% to $37.75.
Westpac dropped 0.6% to $36.39 after the Federal Court ordered the bank to pay a $26 million penalty for failures relating to financial hardship obligations following ASIC action.
ASX Ltd extended its recent sell-off, tumbling another 9.7% to a 10-year low of $46.06 after analysts downgraded the stock on concerns over rising operating costs.
Wall Street edges to fresh records
US markets finished mixed but near record highs as investors digested weaker oil prices and comments from major bank executives.
The S&P 500 edged up less than 0.1% to another all-time high, while the Nasdaq Composite gained 0.1%. The Dow Jones Industrial Average rose 0.4%.
Banking stocks weighed on sentiment after JPMorgan Chase chief executive Jamie Dimon warned annual expenses could exceed previous guidance by US$1 billion. JPMorgan shares fell 2.9%.
BP declined 2.7% after former chairman Albert Manifold said he intended to challenge the company’s account of his departure.
Clark Capital Management Group chief investment officer Sean Clark said a market pause was not unexpected following the recent rally.
“After such a large run-up in the markets, it’s not surprising to me that there is a little bit of a pause,” he said.
“There’s a lot of positives to look at right now. Even though the outperformers are really being driven by tech, AI and AI-adjacent themes, I wouldn’t discount the fact that the broad market is participating as well.”
Asia markets mixed
Asian markets closed mostly weaker on Wednesday.
- China’s Shanghai Composite Index fell 1.2% to 4,093.73 while the Shenzhen Composite declined 1.3% to 2,834.85.
- Hong Kong’s Hang Seng Index lost 1.1% to 25,328.23.
- Japan’s Nikkei Stock Average finished flat at 64,999.41.
- India’s BSE Sensex slipped 0.2% to 75,867.80.
Europe mixed as FTSE inches higher
European markets ended mixed overnight.
- In London, the FTSE 100 gained 0.1% to 10,505.01.
- Germany’s DAX closed flat at 25,177.80.
- France’s CAC 40 added 0.4% to 8,207.89.
Currencies
Major currency pairs traded in relatively narrow ranges as the US dollar held modest gains amid easing geopolitical tensions and continued strength in US equities.
- The euro hovered around US$1.1550.
- The British pound eased slightly to near US$1.3430.
- The Japanese yen remained weak with USD/JPY trading near 159.30.
- The Australian dollar softened marginally against the greenback, trading around US71.5 cents.
- The New Zealand dollar strengthened after the Reserve Bank of New Zealand maintained a hawkish tone.
Commodities
Oil prices fell sharply after reports the US was making progress towards a potential peace agreement with Iran.
- Brent crude dropped below US$95 a barrel for the first time in more than a month, while West Texas Intermediate settled at US$88.68 a barrel.
- Gold prices steadied as investors weighed the implications of easing geopolitical tensions and lower energy prices.
- Aluminium-related stocks gained attention after Alcoa shares jumped as much as 8.7% following a bullish UBS upgrade and concerns over supply disruptions in the Middle East.