Note from MD: Positive economic data buoys market

Positive inflation data from the US overnight sparked a rally on Wall Street. The Nasdaq led the index group with 2.4% of gains, followed by the S&P 500 with 2.1% and the Dow Jones with 1.4%. ASX 200 futures were up around 1.3% at 7am AEDT, and the Australian dollar surged to above US$65c.

Positive inflation data from the US overnight sparked a rally on Wall Street. The Nasdaq led the index group with 2.4% of gains, followed by the S&P 500 with 2.1% and the Dow Jones with 1.4%. ASX 200 futures were up around 1.3% at 7am AEDT, and the Australian dollar surged to above US$65c.

The US Consumer Price Index rose by just 3.2% year-on-year to October, compared with the 3.7% increase registered in August and September. Yields on 10-year US government bonds fell by 20 basis points to 4.44%.

ANZ released research stating that the chances of a rate hike by the Fed in December and January is now zero, and that restrictive monetary policy is having the desired effect on inflation and the labour market. However, the Australian wage price index was released earlier today and revealed the highest growth in 14 years while simultaneously breaking the quarterly record, with annual wages growth hitting 4% in the September quarter. Economists are suggesting this should be the top, and wages growth will moderate as the job market softens. These figures were in line with market expectations.

Chinese EV sales have reached record highs despite the end of extensive subsidies provided by the government. Sales of electric vehicles grew by 29% in China, the world’s largest auto market, during the year up until September. Global growth came in at 34% during the same period, results that bode well for the critical minerals required to make EVs.

There continues to be significant interest in the lithium sector by existing producers and large resources companies looking to diversify into materials of the future. Exxonmobil has announced its plans to begin lithium production from 2027 from its American brine project in Arkansas, where the company has acquired over 120,000 acres of land in the smackover formation.

Lithium M&A shows no sign of slowing down back home either, with LTR, AZS and WC8 all attracting attention from domestic and international players. WC8 managed to stitch together a $100 million equity raising last week with, of which $19 million came from Chris Ellison’s Mineral Resources (ASX: MIN).

The XJO was largely flat this week and is today trading around just above 7,120. It is well above its 52 and 13 week low of 6,751. The index is now only slightly lower than its 200 day weighted moving average of 7,140, but has broken much higher than its 50 day weighted moving average of 6,791, while being far off its 52 week high of just over 7,567.

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