The local share market has enjoyed its best performance in 20 months, surging to a record high for the ninth time this year after a cooling inflation report opened the door for interest rate cuts in 2024.
The benchmark S&P/ASX200 index on Wednesday gained 139.1 points, or 1.75 per cent, to 8,092.3, while the broader All Ordinaries rose 143.8 points, or 1.76 per cent, to 8,320.4.
The gains were the best since a 2.8 per cent rally on November 11, 2022 and propelled the ASX200 past its previous record close of 8,057.9 set 15 days ago.
The market was 0.6 per cent higher and then surged after the Australian Bureau of Statistics reported inflation continued decelerating in the June quarter.
The Reserve Bank's preferred metric of inflation, a measure known as the "trimmed mean", fell from 4.0 per cent to 3.9 per cent in the year to June 30.
Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said the readout was just a touch above the firm's dovish expectations.
"The data reiterates our view that the interest rates are restrictive enough in Australia and the next move by the RBA could very likely be a cut in November," Mr Bhimavarapu said.
The report led the Australian dollar to plunge under 65 US cents for the first time since late April as traders adjusted their bets on the direction of Australian interest rates.
IG market analyst Tony Sycamore said the CPI report had reversed market expectations for domestic interest rate moves. Before the readout, markets viewed an August rate hike as unlikely but possible, with 18 per cent implied odds.
After the report, the market was assigning essentially zero likelihood of an August rate hike - and a high probability of a rate cut in November or December, Mr Sycamore said.
Every sector of the ASX finished higher, with energy and tech the biggest gainers, both rising 2.5 per cent as Woodside added 2.7 per cent to $27.60 and Xero climbed 2.9 per cent to $138.18.
In the heavyweight mining sector, Rio Tinto rose 2.5 per cent to $117.48 as the miner announced its profit for the six months to June 30 was little changed what it made a year earlier.
RBC Capital Markets analyst Kaan Peker said Rio's interim dividend was a touch lower than expected, but most other metrics were broadly in line with expectations.
Elsewhere in the sector, BHP climbed 1.8 per cent to $42.30, Fortescue recovered 3.2 per cent to $18.87 after Tuesday's double-digit selloff, and goldminer Northern Star climbed 1.4 per cent to $14.08.
Three of the four big retail banks finished at their highest level in years, or ever.
Westpac climbed 2.5 per cent to a five-year high of $29.80, NAB added 1.7 per cent to a 16-year high of $38.58 and CBA rose 1.1 per cent to an all-time high of $137.49.
ANZ - whose shares have been dragged by allegations of misconduct by its bond trading team - was the outlier, advancing 1.9 per cent to a two-day high of $29.05 as the bank completed its $4.1 billion acquisition of Suncorp's banking arm.
"This strategically important acquisition boosts our presence in Queensland, adds scale to our retail and commercial businesses, and means we can compete more effectively across the Australian market," said ANZ chief executive Shayne Elliott.
By late afternoon the Aussie had recovered a bit of its losses, buying 65.02 US cents, from 65.61 US cents at Tuesday's ASX close
ON THE ASX:
* The S&P/ASX 200 index on Wednesday rose 139.1 points, or 1.75 per cent, to 8,092.3.
* The broader All Ordinaries gained 143.8 points, or 1.76 per cent, to 8,320.4.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 65.02 US cents, from 65.61 US cents at Tuesday's ASX close
* 98.92 Japanese yen, from 101.71 Japanese yen
* 60.11 euro cents, from 60.62 euro cents
* 50.66 British pence, from 51.04 British pence
* 109.89 NZ cents, from 111.22 NZ cents
