On Thursday, Australia’s benchmark share market closed narrowly in positive territory after a session marked by sharp volatility, driven by surprisingly strong labor market data that stoked fresh fears of additional interest rate increases from the Reserve Bank of Australia (RBA).
The ASX 200 finished the trading day up 16 points, or 0.18%, at 8,839.00, while the broader All Ordinaries index gained 13.20 points, or 0.15%, to close at 9,018.10. Though both benchmarks ended the day in the green, they surrendered all of their substantial early gains in afternoon trading, after the ASX 200 hit an intraday peak of 8,926.30. Following the release of the jobs report, the Australian dollar climbed against the U.S. dollar to trade at 70.12 U.S. cents by market close.
The unexpected strength in employment upended market expectations for RBA monetary policy. Official data released Thursday showed Australia’s unemployment rate held steady at 4.4% in June, in line with economist forecasts, but the economy added a staggering 76,300 new roles during the month – far outpacing the consensus prediction of just 15,000 new jobs. The labor force participation rate also rose to 67%, signaling continued tightness in the jobs market that could put upward pressure on wages and inflation.
Before the data release, money markets priced in a 20% chance of an RBA rate hike at its next policy meeting in August. That probability jumped to 36% immediately after the jobs report, as investors bet that the resilient labor market would give the central bank room to continue tightening to cool persistent inflation. The shift in rate expectations came just one week ahead of the release of June quarter inflation data, a key input for the RBA’s next policy decision. All told, the repricing of hawkish RBA odds wiped roughly 65 points off the ASX 200’s early rally.
Cameron McCormack, senior portfolio manager at VanEck, noted that the tight labor market has eliminated the headroom the RBA needs to pause its rate hike cycle. “We believe there is at least one more rate hike coming this year, and a considerable chance that we will see two hikes,” McCormack said in comments following the data release.
Six of the ASX 200’s 11 sectors ended the session in negative territory, with rate-sensitive technology and consumer discretionary stocks posting the largest losses. Accounting software giant Xero dropped 5.01% to close at $64.45, logistics tech firm WiseTech Global slumped 6.97% to $31.48, and family safety platform Life360 fell 5.45% to $24.12. In the consumer discretionary space, retail conglomerate Wesfarmers led declines with a 1.99% drop to $88.11, electronics retailer JB Hi-Fi fell 1.83% to $76.71, and furniture retailer Harvey Norman slipped 0.64% to $4.68.
These broad losses were offset by strong gains across the mining and materials sector, which kept the benchmark index in positive territory at closing. BHP shares rose 1.46% to $60.63, Rio Tinto added 0.47% to $162.74, and Fortescue Metals gained 1.02% to $18.76. A rally in global gold prices, which climbed to a high of $US4116 per ounce, also lifted gold mining stocks: Northern Star Resources rose 1.92% to $20.74, Evolution Mining jumped 1.85% to $11.57, and Newmont added 0.88% to $136.85.
In individual company news, Macquarie Group shares slipped 0.46% to $253.75 after the investment bank announced that long-serving chief executive Shemara Wikramanayake would retire from her role in November. Energy firm Origin Energy closed up 0.77% at $10.50 despite revealing that a cyberattack had stolen sensitive customer data, including full names, residential addresses, dates of birth, contact details, account information, and partial payment card and bank account details. Gold and copper producer Sandfire Resources climbed 3.58% to $19.36 after the firm announced record unaudited annual group sales revenue of $574 million.