ASX hits another record high amid rate cut hopes

The Australian sharemarket hit record levels again on Friday, buoyed by optimism of local investors who cheered the stronger prospect of a February interest rate cut following inflation data that came in lower than expected earlier this week.

The S&P/ASX 200 closed 38.6 points or 0.5 per cent higher to 8532.3 points, with the gains driven by tech, real estate and materials stocks, all up around 1.1 per cent.

Thursday’s session finished at 8493.7.

Friday’s session was also partially lifted by a strong lead from Wall Street, pushed higher by Tesla, IBM and Meta Platforms after a rush of profit reports from some of America’s most influential companies.

Most stocks climbed, but losses for Nvidia and Microsoft weighed on Wall Street. Credit: AP

The lifters

Boss Energy wound up as the day’s top performer with gains of 5.4 per cent, followed by Emerald Resources (4.6 per cent) and retailer Premier Investments (up 4.6 per cent).

Some miners finished higher, with BHP up by 1.2 per cent and Rio Tinto 0.3 per cent higher. Fortescue advanced earlier in session but closed 0.1 per cent lower.

Most of the big four banks were higher earlier in the day, but finished in the red: NAB rose 0.6 per cent; CBA finished flat; Westpac and ANZ closed 0.2 per cent lower.

IAG finished 3 per cent higher after announcing it would release $200 million as part of a $380 million provision for a matter that the Federal Court has ordered can no longer proceed as a class action.

The laggards

Magellan Financial Group deepened its losses throughout the day and spent most of it at the bottom of the bourse, closing 7.6 per cent lower. The $1.9 billion fund manager on Thursday revealed a series of changes to its executive management, including the departure of head of investments Gerald Stack following 18 years at the firm.

Origin Energy dipped 6.7 per cent after lowering its LNG guidance, while Nanosonics slid 3.1 per cent.

The lowdown

A strong finish to the month of January provides a “reasonably consistent but not perfect guide” to the rest of the year, according AMP chief economist Shane Oliver.

“Since 1980, 85 per cent of positive Januarys have gone on to a positive year in the US, and in Australia it’s 76 per cent,” Oliver wrote in a note.

“So, with US shares up around 3.2 per cent and Australian shares up around 4.4 per cent in January, it’s a positive sign for the year ahead.”

However, a good January doesn’t mean there isn’t a correction coming; Oliver is forecasting a correction of more than 15 per cent some time this year.

“Ultimately, we see shares doing OK this year as Trump’s more negative policies are constrained by a desire to see shares rise at the same time that some of his policies reinvigorate the US, and with central banks continuing to cut rates, with the RBA joining in, boosting growth and profits.”

On the topic of interest rates, the path has been cleared for the Reserve Bank to cut rates next month, Oliver added.

“With trimmed mean inflation coming in at 0.5 per cent quarter-on-quarter and materially below the RBA’s expectations, and the breadth of high price rises falling sharply implying a downwards adjustment to RBA inflation forecasts, it’s now likely that the RBA will start easing in February.”

Overnight, the S&P 500 rose 0.5 per cent, as four out of every five stocks in the index climbed. The Dow Jones Industrial Average added 168 points, or 0.4 per cent, and the Nasdaq composite gained 0.3 per cent. The Australian sharemarket is set to climb, with futures pointing to a rise of 36 points or 0.4 per cent at the open. The ASX jumped by 0.6 per cent on Thursday.

Meta Platforms helped push indexes higher after rising 1.6 per cent. The company behind Facebook and Instagram delivered a better profit for the end of 2024 than analysts expected. Perhaps just as importantly for the market, it also talked up its artificial intelligence efforts and said it will continue to invest in the space.

That calmed some of the worries created by a Chinese upstart, DeepSeek, when it said it developed a large language model capable of competing with the world’s best, without having to use top-flight chips. That raised questions about whether all the investment expected for AI chips, data centres and electricity is really needed, and sent a shock through markets at the start of the week.

The AI boom has been a primary reason for the US stock market’s run to repeated records in recent years, and the threat has hit stocks such as Nvidia particularly hard. The chip company that’s become the symbol of the AI frenzy spent most of Thursday lower, but it ended with a gain of 1 per cent and was one of the strongest forces lifting the S&P 500.

Quote of the day

“We assess with high confidence that the DeepSeek AI Assistant app produces biased outputs that align with Chinese Communist Party (CCP) strategic objectives and narratives and collects user personal information from their device and collects prompt information entered by users and stores this information in China.”

That’s Australia’s largest cybersecurity provider CyberCX in a threat advisory on Friday, warning government agencies and critical infrastructure providers to ban DeepSeek, the Chinese generative AI app that rocketed up app store charts and unsettled global sharemarkets this week.

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If you’ve ever looked at the latest inflation figures and thought they don’t really reflect the ballooning or shrinking prices you’ve been paying, you’re probably right.

Like most measures of our economy’s health, the consumer price index (CPI) – our main inflation gauge – is only a rough estimate of what’s happening to prices. It tracks changes in the costs of a vast range of things – but also skips over some key items we spend on. Read the column here from economics writer Millie Muroi.

With AP

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