ASX jumps after Wall Street’s wild ride

Derek Rose | October 14, 2022

The local share market has gained across the board after some extreme volatility on Wall Street overnight following the release of monthly United States inflation figures.

The benchmark S&P/ASX200 index finished Friday up 116.2 points, or 1.75 per cent, to 6758.8. The broader All Ordinaries was up 114.1 points to 6948.6, a 1.67 per cent rise.

The gains came after a whipsaw trading day in the US, where the major indices at first plunged after inflation came in slightly hotter than expected – 8.2 per cent rather than 8.1 per cent.

But then US shares staged a massive comeback in one of the biggest one-day reversals in Wall Street history. The Dow Jones surged 1500 points off its lows and the S&P500 snapped its six-day losing streak to close up 2.6 per cent.

Traders said there was no “new news” that could explain the surge, so it must have come from how market participants were positioned and seller exhaustion.

“The best you could say is this is something of a short squeeze or those on the sidelines with cash stepping in,” ForexLive chief currency analyst Adam Button wrote. 

Ausbiz anchor Kyle Rodda called it “a bit of a Mia Wallace rally, like Pulp Fiction – a bit of adrenaline shot straight to the heart, wakes up briefly but certainly not in a healthy state, you would dare say”.

The local bourse soared at the open, rising 129 points in 16 minutes, and gave back just 13 of them by close of trading.

“It’s more like Simon says – you know, US says ‘rally five per cent’, Aussie market is just like, ‘yep, cool, no worries’,” Sydney-based CMC Markets analyst Azeem Sheriff told AAP.

“It just completely disregarded the CPI data, which was negative. The core CPI was negative in anyone’s book. 

“Inflation going, I don’t know how that’s a positive for equities, that’s why it’s more of a technical play.

“It looks like the Aussie market just looked at the outcome of the US market, which ended up in the positive, therefore the Aussie market had to end up with a positive.”

Mr Sheriff said he suspected what he described as a short-term bear market rally would continue into next week.

“It can’t continuously keep selling, otherwise it ends up being capitulation, and I think that’s too early to do at this stage.”

Friday’s rally wasn’t quite enough to offset the losses on Monday and Tuesday and for the week the ASX200 closed slightly in the red, down four points, or 0.06 per cent.

It’s still up 4.4 per cent so far this month, but down 9.2 per cent for the year.

The energy sector was the biggest gainer on Friday, rising 3.8 per cent as Woodside climbed 4.0 per cent to $33.95 and Santos added 4.4 per cent to $7.80.

Coalminer New Hope finished up 2.1 per cent to an all-time closing high of $6.86, while Whitehaven Coal was close to one, adding 2.1 per cent to $10.82.

The big banks finished at their best levels in several months, with Westpac adding 1.9 per cent to $23.50, NAB up 1.6 per cent to $31.08, CBA rising 0.8 per cent to $98.90 and ANZ growing 0.4 per cent to $25.36.

Bank of Queensland, whose strong full-year earnings report on Wednesday apparently inspired the rally among its larger peers, finished up 1.6 per cent to a five-month high of $7.73.

IAG went into a trading halt after the High Court of Australia dismissed its appeal of a Federal Court ruling related to business interruption claims during the COVID-19 lockdowns.

In the heavyweight mining sector, BHP gained 2.0 per cent to $40.02, Fortescue Metals rose 0.7 per cent to $17.11 and Rio Tinto advanced 1.0 per cent to $96.61.

Goldminers were mostly down, however, with Northern Star falling 1.9 per cent, Newcrest dipping 1.2 per cent and St Barbara dropping 3.3 per cent.

The consumer staples sector was up 2.0 per cent, with Woolworths adding 2.6 per cent, Coles up 2.5 per cent and BWS and Dan Murphy’s owner Endeavour Group 2.4 per cent.

In currency, the Australian dollar reclaimed some of its recent losses against its US counterpart.

The Aussie was buying 63.33 US cents, from 62.71 US cents on Thursday.

Minutes from the Reserve Bank’s recent meeting will be released on Tuesday and monthly Australian labour market figures will drop on Friday.

In China, the members of the ruling Community Party will gather for their twice-a-decade national congress meeting.

ON THE ASX:

* The benchmark S&P/ASX200 index on Friday gained 116.2 points to 6758.8, a gain of 1.75 per cent.

* The broader All Ordinaries fell 7.8 points, or 0.11 per cent, to 6734.5.

CURRENCY SNAPSHOT:

One Australian dollar buys:

* 63.33 US cents, from 62.71 US cents at Thursday’s close

* 93.32 Japanese yen, from 92.07 yen

* 64.68 Euro cents, from 64.66 Euro cents

* 55.94 British pence, from 56.66 pence

* 111.72 NZ cents, from 111.91 NZ cents.