Closing Bell 10th October: ASX Soars Amid Global Economic Signals

Bond traders re-evaluate RBA’s stance amid global cues
Dovish remarks from the US Federal Reserve and NAB’s recent business survey indicating easing price pressures have led bond traders to reconsider rate hike expectations, now leaning towards potential cuts. The survey revealed a decline in labour and purchase cost growth, reinforcing a market sentiment initially influenced by the Fed’s comments. As a result, the S&P/ASX 200 surged by over 1.3%. Current market predictions suggest a reduced likelihood of a rate hike by May next year, with a reintroduced possibility of a rate cut by year-end.

NAB survey: A softer inflation outlook
National Australia Bank’s latest business survey presents a promising picture for inflation. The findings showed a decline in price and cost growth for the month. NAB’s chief economist, Alan Oster, highlighted the survey’s positive signs for inflation, suggesting that some key cost pressures driving inflation might be receding. Despite expectations of strong inflation in the upcoming Q3 CPI release, the recent survey results hint at a more favourable broader inflation outlook.

Oil remains elevated amid Middle East tensions
The ongoing conflict between Hamas and Israel has kept oil prices elevated, with West Texas Intermediate maintaining its significant jump from Monday. The conflict, now in its fourth day, has heightened concerns about potential disruptions in the global oil supply chain, especially if the US and Iran become more deeply involved. While Israel’s direct role in global oil supply is minimal, the broader implications of the conflict, including potential threats to the crucial Strait of Hormuz, are significant.