ASX At Three-Month Highs

The ASX 200 continued its rally on Friday and is now at a three-month high. Any further gains from here would represent a breakout from the recent trading range that has persisted since the middle of May. Telecommunications was the strongest sector on Friday, mainly as a result of Telstra gaining 1.4%. The Dow Jones and S&P 500 opened higher on Friday night and then traded sideways for the rest of the trading session.

The US released its CPI and retail sales data, both of which came in slightly below expectations. CPI growth was 0.5% for the month of September while retail sales were 1.6%. This represents the best month for retail sales growth since 2015 although the number is likely affected by the effects of the recent hurricanes that hit Florida and Texas. For example, many vehicles that were damaged in the storm have been replaced which counts towards the retail sales number.

Gold prices jumped on the release of the CPI data which showed that weakness in inflation is persisting. Market participants seem to be concerned that this data may encourage the Fed to slow its rate hiking path. According to the CME Fed Watch tool the probability of a December rate hike is now just below 80%, a fall from a week ago when it was almost at 90%.

This week Australia will release the minutes from the most recent monetary policy meeting. These may show that the RBA is edging closer to a rate hike. Later in the week Australian employment data will be released for the month of September which is expected to show 15,000 new jobs created with the unemployment rate steady at 5.6%. Although this would be significantly weaker than the prior months 54,000 jobs created, it would still be a strong number. On Thursday this week, Chinese GDP will be released, an important data point for Australia as China is one of our biggest trading partners.   

Data Releases:

–    China CPI 12:30pm AEDT

–    China PPI 12:30pm AEDT

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This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.