ASX advances to a one-week high as Fed Powell eases inflation fears

February 25, 2021 - 2 months ago
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The Australian sharemarket picked up its pace from the opening session as much encouragement from Wall Street after U.S. Federal Reserve Chair Jerome Powell’s comments soothe inflation fears.

Powell told lawmakers on Wednesday it may take more than three years to reach the central bank’s inflation goals, a sign the Fed plans to leave interest rates unchanged for a long time to come.

Yields came off their highs after Federal Reserve Chair Jerome Powell continued to downplay the threat of inflation, saying it could take three years to reach the central bank’s target consistently.

In Wednesday’s testimony in front of the House of Representatives Financial Services Committee, Powell added that inflation could be volatile as the economy reopens and there is increased demand.

But he does not expect inflation to run hot and said the central bank has the tools to fight it if it should.

The stock market posted a sharp reversal in the previous session after the Fed chief’s dovish remarks eased fears about a change in monetary policy in the face of a pickup in inflation and interest rates.

Powell said Tuesday that inflation was still “soft” and that the U.S. economy was “a long way from our employment and inflation goals.”

At the closing bell, the benchmark S&P/ASX 200 index rose +56.2 points, or +0.83%, to 6,834.0, while the All Ordinaries added +56.3 points, or +0.80%, to 7,105.7.

The Materials, Energy, Health Care, Telecommunication, Financials, Real Estate, Utilities, and Discretionary closed in positive territory while Staples and Industrials fell into the red.

Miners were strong with BHP Group leading the titans higher after hitting $50.78 intraday, and settled at +3.25%, to $50.45, Rio Tinto rose +1.92%, to $128.88, while Fortescue Metals Group climbed +3.1%, to $25.24, South32 added +2.14%, to $2.86 and Mineral Resources slipped -0.28%, to settle at $39.76.

Gold resources were weak, with Newcrest Mining falling from -2.45% to $24.68, Northern Star lost -3.92%, to $10.05, and Evolution dropped -3.26%, to $4.15.

The Financials sector were firmer, with Westpac Banking Corp leading the “Fab Four” banks higher after rising +1.29%, to $24.36, Commonwealth Bank rose +1.11%, to $83.70, while National Australia Bank added +1%, to $25.15, Australia and New Zealand Banking Group gained +0.53%, to $26.77, and Macquarie Group lost -1.08% and settled at $145.32.

Travel stocks were firmer with Webjet surging +4.36%, to $5.74, with Flight Centre rallying +8.87%, to $17.79, Qantas firmed +1.8%, to $5.10, Regional Express rose +2.15%, to $1.665 and Corporate Travel Management added +1.5%, to $20.99.

Flight Centre swung to a first-half $233 million loss compared with a $22 million profit in the year-earlier period.

Qantas Airways sunk a $1.1 billion interim loss, having reported a $445 million profit in the previous corresponding period. Revenue dived 75% to $2.3 billion in the six months ended December 31. Qantas did not pay a dividend.

In the previous session, Helloworld told the market it would profit in the first half of financial 2022 and that it would sustain cash losses of $1 million to $1.5 million a month for the next six months.

Healthcare was firmer with Biotechnology giant CSL adding +0.85%, to $270.25, while ResMed rose +0.04%, to $25.05, Cochlear rose +2.09%, to $214.69, Ramsay Health surged +7.74%, to $68.18 and Mesoblast lost -3.15%, to $2.46.

Wesfarmers finished +0.1%, higher to $50.43, while Woolworths saw its share price end the trading session firmer +1.47%, to $40.09 while its rival Coles Group rose +0.19%, to $16.02.

Meanwhile, our local currency, the Australian dollar, is currently buying US$0.7984 (as of writing).

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