Australian shares have risen sharply, buoyed by miners, as investors found comfort in Wall Street's strong finish following a report that the US Federal Reserve will likely debate a less-aggressive interest rate hike in December.
All three major US stock indexes surged more than 2 per cent, and notched their biggest Friday-to-Friday percentage gains since June, closing the book on a week marked by mixed earnings, soft economic data and political turmoil in Britain.
Some Fed officials have begun sounding out their desire to slow down the pace of rate hikes soon, according to a Wall Street Journal report.
The ASX 200 index closed up 103 points, or 1.5 per cent, to 6,779.
By 4:15pm AEDT, the Australian dollar was down at 63.39 US cents.
All sectors were higher, with mining and education stocks leading the gains.
Only 18 stocks finished the session in the red. One of them was New Hope Corp, which dropped 4.3 per cent.
Among the best performers were Novonix (+33.5 per cent), Champion Iron (+5.9 per cent) and Evolution Mining (+7.7 per cent).
Financials added 1 per cent and were set to close at their highest levels in more than two months. The four largest Australian lenders advanced between 0.2 per cent and 1.2 per cent.
Miners were the lead gainers on the local bourse as they surged 2.6 per cent and were on track to record their best session since early October.
Sector heavyweights BHP, Rio Tinto and Fortescue jumped between 1.2 per cent and 2.6 per cent.
South32 reversed gains, dropping 1.9 per cent, as the diversified miner slashed its annual coal output forecast due to a workers' strike over pay and an extended longwall move at its Appin mine in the Illawarra project.
Technology stocks advanced 2.3 per cent, snapping a three-day losing streak. Block, software maker Xero and WiseTech Global rose between 1.4 per cent and 3.5 per cent.
Higher oil prices lifted Australian energy stocks, with Woodside Energy adding 0.4 per cent.
Gold stocks climbed 3.9 per cent on strong bullion prices, with Northern Star Resources and Newcrest Mining jumping between 5 per cent and 2.9 per cent, respectively.
GDP forecasts
Australia's economic growth is expected to slow sharply next financial year as rising inflation curbs household consumption, according to new forecasts to be unveiled by Treasurer Jim Chalmers in Tuesday's budget.
Budget papers are set to show gross domestic product (GDP) for fiscal 2023-2024 will be downgraded to 1.5 per cent from the 2.5 per cent forecast in April. GDP is also due to be downgraded to 3.25 per cent from 3.5 per cent for 2022-2023, according to draft figures from the Treasury.
The drop-off is blamed on a slump in consumer spending as rising prices and the biggest jump in interest rates in decades cut into household budgets.
Officials are also warning that a slowing global economy, in particular the sputtering Chinese property sector, will hit growth in Australia, which is enjoying its lowest unemployment rate since the 1970s.
"While we have plenty of things going for us, Australians have not been immune from rampant global inflation, heightened uncertainty and cost of living pressures here at home," Mr Chalmers said in a statement on Monday.
"These headwinds will inevitably impact our growth outlook, and Australians are already feeling the pinch from higher prices and rising interest rates."
Record commodity prices and a booming labour market are expected to provide budget relief and analysts expect the deficit to shrink to between $25 billion and $45 billion, lower than initially feared.
But Mr Chalmers has repeatedly warned Australians to expect a "responsible budget" and said the government can only provide limited cost-of-living support for fear of adding stimulus that works at cross purposes to the Reserve Bank of Australia's rate hikes.
"The best defence against these economic headwinds is a responsible budget ... along with responsible cost-of-living relief that won't make the job of the Reserve Bank more difficult," Mr Chalmers told the Australian Financial Review.
US stocks rally
Wall Street closed sharply higher and benchmark Treasury yields hit pause on Friday following signals that the Federal Reserve might consider less aggressive inflation-curbing tactics after November.
All three major US stocks surged more than 2 per cent, and notched their biggest Friday-to-Friday percentage gains since June, closing the book on a week marked by mixed earnings, soft economic data and political turmoil in Britain.
The rally gained momentum after US Treasury Secretary Janet Yellen said inflation is not becoming embedded in the economy, and San Francisco Federal Reserve President Mary Daly said it is time for the Fed to consider slowing the pace of its interest rate hikes.
"Despite a weak start for the day, equity markets turned around and continue to exhibit intraday volatility. People are tired of selling," said David Carter, managing director at JPMorgan Private Bank in New York.
"It is becoming time to change the station and recall that interest rates can go down as quickly as they have gone up and equities will benefit from this."
"To quote a country music song, 'it's all over but the crying'," Mr Carter added.
The Dow Jones Industrial Average rose 748.97 points, or 2.47 per cent, to 31,082.56; the S&P 500 gained 86.97 points, or 2.37 per cent, to 3,752.75; and the Nasdaq Composite added 244.87 points, or 2.31 per cent, to 10,859.72.
Meanwhile, the greenback tumbled against the yen, prompting analysts to suspect Tokyo of intervening to halt the Japanese currency's slide.
"Trading data suggests the Bank of Japan stepped in to bid up the yen despite their comments to the contrary, suggesting currency markets remain extremely uncertain and volatile," Carter said.
European shares slid as investors fretted about inflation and the economic effects of central banks' efforts to rein it in, with the spectre of possible recession lurking on the horizon.
The pan-European STOXX 600 index lost 0.6 per cent, while MSCI's gauge of stocks across the globe gained 1.5 per cent.
Oil prices advanced as hopes of stronger Chinese demand outweighed worries of a global economic slowdown.
Brent crude oil was up, trading at $US93.77 a barrel, by 10:35am AEDT.
ABC/Reuters
