Markets wrap: Inflation fears ease to boost shares ahead of expected US rate hike

Investors breathed a sigh of relief as inflationary pressures eased somewhat ahead of Thursday morning’s meeting of the US Fed.

The major banks also rose ahead of Thursday’s employment data dump from the Australian Bureau of Statistics. Picture: NCA NewsWire / Jeremy Piper

The Australian sharemarket followed US stocks higher on Wednesday as investors enjoyed relief from the inflationary pressures that have roiled global markets in recent weeks.

Plunging commodity prices and resounding calls for a Russian ceasefire in Ukraine helped release the pressure valve both home and abroad as hopes firmed that central banks will not be as aggressive in winding back support over the course of 2022.

Technology, travel, retail and telecommunications stocks shone brightly as the ASX 200 chased Wall Street higher, adding 77.8 points, or 1.1 per cent to close Wednesday at 7175.2.

The Broader All Ordinaries rose by 79.7 points or 1.1 per cent to 7435.8, while the Australian dollar improved to 72.09 US cents at the local close.

Investors breathed a sigh of relief on Wednesday as inflationary pressures eased somewhat. Picture: NCA NewsWire/ Gaye Gerard

There were gains for every local sector as traders awaited Thursday morning’s meeting of the US Fed, where the country’s first post-pandemic rate hike was widely expected to be locked in.

OANDA analyst Edward Moya said soft inflation data, an uncertain medium-term outlook and weakening oil prices supported the theory the US Fed will hold off committing any additional hikes beyond those it has already pencilled in for the year.

“There is no benefit to overcommit on tightening expectations given all the geopolitical risk and inflation uncertainty that is on the table and potential recession risk from abroad,” Mr Moya said.

The improved risk appetite also came as economic and political pressure ramped up on Russia to find a diplomatic solution in its conflict with Ukraine, while retreating oil and ore prices helped ease the inflation fears that have had a chokehold on markets in recent weeks.

US Federal Reserve Chairman Jerome Powell is expected to announce the first post-pandemic interest rate hike on Thursday morning Australian time. Picture: Tom Williams / AFP

Investors were already sweating over price pressures before the conflict in Eastern Europe started last month but subsequent sanctions and supply chain disruption – and the surging price of fuel, food and core minerals – has made for an extremely volatile investment environment.

The Australian sharemarket has bounced around in a 250-point range since the start of the Ukrainian conflict and on Wednesday the prospect of a kinder rate cycle helped it claw back Tuesday's losses.

City Index analyst Tony Sycamore said the relief was “palpable” in the beaten-up technology sector with Afterpay owner Block up 7 per cent to $142.92, Xero 4.1 per cent higher to $96.93, Appen 4.8 per cent higher at $7.02 and Wisetech Global 4.7 per cent ahead at $49.09.

Gains were also common across the health sector with blood giant CSL climbing 1.8 per cent to $268.51 and Resmed finishing the day 2.8 per cent higher at $34.25.

Telstra also leapt, adding 1 per cent to $3.95, but was outshone by telco sector luminaries such as TPG, up 3.5 per cent to $5.66, Seek, up 4.3 per cent to $29.96, REA Group, 4 per cent ahead at $135.65 and Carsales.com, 2.9 per cent higher at $21.02.

Plunging commodity prices and resounding calls for a Russian ceasefire in Ukraine helped release the pressure valve both home and abroad. Picture: NCA NewsWire / Jeremy Piper

The major banks also rose ahead of Thursday’s employment data dump from the Australian Bureau of Statistics.

Commonwealth Bank was up 0.9 per cent to $104.76 and Westpac rose by a similar percentage to $23.69, with ANZ jumping 1.8 per cent to $27.17 and NAB 0.4 per cent higher to $30.75.

Macquarie Group gained 1.8 per cent to $189.44.

Supermarket Woolworths surged 3 per cent to $36.60 and rival Coles was up 1.7 per cent to $18.01, while Bunnings and Officeworks owner Wesfarmers ended 1.5 per cent higher at $50.48.

Travel firms got a massive boost from the news New Zealand will be opening travel to Australia sooner than expected.

Qantas ended 2.2 per cent higher at $5.05, Webjet jumped 3.3 per cent to $5.67, Flight Centre was 1.9 per cent higher at $19.11, Corporate Travel 5.3 per cent ahead at $22.62 and Helloworld rose 3.5 per cent to $2.40.

Miner BHP slipped 0.4 per cent to $45.18 and continued a poor recent run, while Woodside Petroleum was the only other notable decline at the top end of Wednesday's market.