Banks, miners boost ASX amid US-China trade deal hopes

The Australian sharemarket climbed on Monday, buoyed by hopes China and the US were moving towards a trade deal and the prospect of an interest rate cut from the US Federal Reserve.

The S&P/ASX 200 closed 36.6 points, or 0.4 per cent, higher at 9055.60, with eight of 11 industry sectors in positive territory, led by technology, energy and financial stocks.

The gain comes after US inflation data all but locked in an interest rate cut, and on reports the US and China have reached a deal framework to settle trade tensions around rare earths and technology exports.

Financial stocks had a solid day, with Commonwealth Bank, the biggest stock on the bourse, adding 0.8 per cent while big four peers Westpac (up 0.6 per cent), National Australia Bank (up 0.7 per cent) and ANZ Bank (up 0.6 per cent) also climbed.

Miners were mixed as the raw materials sector ground 0.4 per cent higher, boosted by broad lifts in iron ore giants Fortescue (up 1.3 per cent), Rio Tinto (up 1.3 per cent) and BHP (up 0.7 per cent).

Copper producers also performed well, with Capstone posting gains and Sandfire Resources rallying 2.8 per cent to above $16 after a strong September quarter update.

Gold miners were mixed as the precious metal continued to ease from its recent dizzying heights to trade at $US4080 ($6243) an ounce as risk-on sentiment chased away safe-haven buyers.

Technology company Nuix slumped 16.8 per cent after it announced the resignation of chief executive Jonathan Rubinsztein, who is leaving after almost four years in the job.

Energy companies were mixed as oil prices treaded water. Woodside Energy rose 1.2 per cent, Santos gained 1.4 per cent and Ampol fell 0.9 per cent.

After a strong start, the local bourse handed back roughly 40 per cent of its early gains by the close, IG markets analyst Tony Sycamore said.

“Not entirely the most convincing performance I’ve seen given the news we have out there, which does obviously provide a further backdrop for risk assets and potentially ease concerns around a slowdown into year end,” he said.

Local uncertainties such as Wednesday’s all-important quarterly inflation print and its impact on the Reserve Bank’s road ahead for interest rates could have contributed to the session’s hesitant turn, Mr Sycamore said.

“We need to get some of the unknowns out of the way, specifically with regards to the inflation data here in Australia,” he said.

US stocks hit records on Friday after an update on inflation came in a bit less painful than feared.

The S&P 500 rose 0.8 per cent and topped its prior all-time high, which was set this month. The Dow Jones Industrial Average rallied 472 points, or 1 per cent, and the Nasdaq composite climbed 1.1 per cent. Both also set records.

The data on inflation is encouraging because it could mean less pain for lower- and middle-income households struggling with still-high increases in prices every month. Even more importantly for Wall Street, it could also clear the way for the Federal Reserve to keep cutting interest rates in hopes of giving a boost to the slowing job market.

The Federal Reserve, which meets this week, is widely expected to cut interest rates by 25 basis points after data showed US consumer prices increased slightly less than expected in September.

The Fed cut its main interest rate last month for the first time this year, but it’s been hesitant to promise more relief because lower rates can make inflation worse beyond goosing the economy and prices for investments. Following the inflation report, traders continue to bet on a near certainty that the Fed will cut rates at its next two meetings, including one next week.

“Right now, Fed officials are more concerned about the labour market than about inflation,” according to Brian Jacobsen, chief economist at Annex Wealth Management. “Without any evidence to the contrary, there’s nothing to really change their minds about cutting.”

Stocks had been shaky in recent weeks following a tremendous rally of 35 per cent for the S&P 500 from a low in April. Criticism climbed that stocks became too expensive after their prices rose much faster than corporate profits. Worries also flared about potentially bad loans that banks made following a period of calm that may have encouraged too much risk-taking. President Donald Trump rattled markets after threatening much higher tariffs on China, the world’s second-largest economy.

But stocks have rebounded each time, only to push higher. Banks have characterised the industry’s hiccups as just a collection of one-offs, while Trump is set to meet China’s leader, Xi Jinping, at a conference next week.

With AAP, AP, Reuters

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