The Australian sharemarket rallied on Thursday morning, boosted by mining and information technology stocks after Wall Street shrugged off banking worries and extended its gains.
The S&P/ASX 200 was up 59.6 points, or 0.9 per cent, to 7,109.9 at the open, as all sectors traded in the green.The mining sector buoyed the index as market heavyweights BHP , Rio Tinto and Fortescue climbed. Information technology also lifted, after softened inflation figures from Wednesday alleviated fears about the extent of further interest rate hikes. Shares in software company WiseTech lifted 2.2 per cent.
The local gains came after US stocks rallied overnight as Wall Street shook off more of the fear that dominated sentiment earlier this month. “I think the market has been very much focused on a set of extremes, like what we saw in the COVID period, where it was either: The sky is falling, or everything is euphoric,” said Zach Hill, head of portfolio management at Horizon Investments.While he doesn’t think the fears about banks are completely gone, he says now “we’re in much more of a middle ground environment, in terms of the economy and in terms of rate hikes flowing through to economic activity.
America’s Federal Deposit Insurance Corp announced the sale of much of Silicon Valley Bank’s assets at the start of this week. Regulators earlier this month also announced programs to help banks raise cash more easily. That, plus the implicit promise US officials have seemed to make about protecting depositors at other banks, should help support the industry, analysts say.
The path ahead for the Federal Reserve and other central banks has become much more difficult because of the banking industry’s struggles. Typically, the still-high inflation seen around the world would call for even higher interest rates. But that would risk more pressure on banks, which could pull back on lending and squeeze the economy.
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