​EBC Markets Briefing | Australian shares set fresh highs, driven by banking sector

Australian shares have set new all-time highs on Wednesday due to weaker-than-expected inflation data. The S&P/ASX 200 has been on a stunning run for a few months now.

Data from the ABS showed the CPI rose 0.6% in Q4, under market forecasts of 0.8%. According to a separate report, retail sales flipped into reverse in December.

Both could hasten a RBA policy pivot. Despite the positive sign of disinflation, the country is still grappling with the highest inflation among major economies.

The “Big Four” banks all added over 3% so far with expectations for improved margins. Goldman does see a few important positives for the sector in 2024, citing that new mortgage approvals appear to have reached a trough and capital positions are strong.

Considering the recent economic developments, EBC Institute Perspectives highlight the potential implications for the Australian financial markets. The weaker-than-expected inflation data and the RBA policy considerations are crucial factors to monitor.

GDP grew 0.2% in Q3, slightly less than expected on weak export demand, particularly in Asia, although domestic spending remained robust amid high interest rates and inflation.

Australia’s largest export – iron ore has failed to extend its rally from last year. Concerns over the indebted property sector in top consumer China countered optimism out of rising stimulus.

In the context of the Australian economic landscape, EBC Forex Market Analysis emphasizes the impact of global factors, such as export demand and geopolitical considerations, on currency movements, with a focus on the Australian Dollar.

The S&P/ASX 200 has found strong support around its 50 EMA. Technical indicators point to further gains, but the upcoming Fed’s meeting and the US jobs report are heightening uncertainties around the short-term direction.

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