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Australian shares achieved a new milestone on Friday, driven by optimism that propelled Wall Street to record highs, fueled by expectations surrounding the US Federal Reserve’s significant rate cut and its implications for the global economy.
ASX Performance
The S&P/ASX 200 Index rose by 38.3 points, or 0.5%, to close at 8230.2. During trading, the index reached an intraday high of 8246.2, marking a record for the sixth consecutive session. This positive momentum has positioned the index for a weekly gain of 1.6%.
Tim Hext, head of government bond strategies at Pendal, commented on market valuations, noting, “The market is about 12% expensive, and on a scale of 1 to 10, I would say the overvaluation is between 7 and 8.” He suggested that a level of 10 would be reached if the overvaluation climbs to 25% or pushes past 9,000 points, warning, “That’s when you start to hear ringing bells.”
Sector Performance
All 11 sectors of the ASX were in the green, with the technology sector leading the charge. Notably, shares of Life360 rose by 3.7%. The major banks also extended their early gains, with ANZ increasing by 0.9%.
However, the mining sector faced some headwinds. While BHP managed a slight gain of 0.2%, Rio Tinto saw a decline of 0.3%. In contrast, the tech sector shone brightly, with Zip soaring by 4.2%.
Myer Holdings Faces Setback
In a contrasting performance, department store giant Myer Holdings experienced a significant drop of over 10% following a disappointing report on profits and sales for the 2024 financial year. This downturn reflects broader challenges within the retail sector.
Wall Street Influence
The surge in Australian shares was largely influenced by strong performances on Wall Street. The S&P 500 and the Dow Jones Industrial Average both reached new highs, with the S&P 500 closing at 5713.64—marking its first time topping 5700. The Dow closed at 42,025.19, having crossed the 42,000 threshold for the first time. The Nasdaq also performed well, leaping by 2.5%.
Cryptocurrency and Commodity Market Reactions
In the cryptocurrency space, Bitcoin saw a rise, while commodities reflected a positive outlook as well. Gold prices approached an all-time high, and oil prices increased by more than 1% on the anticipation that the US rate cut would stimulate economic activity and enhance energy demand.
Conclusion
As the Australian market celebrates its latest record, the dynamics between local performances and global influences highlight the interconnectedness of financial markets. With ongoing developments in the US economy and the impact on commodity prices, market participants will be closely watching for further trends as the fiscal year progresses.
