The Australian share market has rebounded from its two-day sell-off as cooling US inflation outweighed somewhat hawkish predictions by the US Federal Reserve.
The benchmark S&P/ASX200 index on Thursday finished up 34.2 points, or 0.44 per cent, to 7,749.7 while the broader All Ordinaries gained 39.4 points, or 0.49 per cent, to 8,002.5.
The gains came after the US Labor Department reported overnight US consumer prices rose just 3.3 per cent in the year to the end of May, down from 3.4 per cent the month before.
Economists called the readout extremely encouraging, noting it meant US inflation was finally close to the levels before the COVID-19 pandemic, which could give the US Federal Reserve the confidence it needs to begin cutting interest rates.
But hours later the Fed forecast it would trim interest rates just once this year - down from the three cuts officials had predicted in March and one fewer than traders had been hoping for.
"We had really, really good inflation data in the second half of last year, then kind of a pause in progress in the first quarter,” Fed chairman Jerome Powell told reporters.
Rob Hogg, chief investment officer at Melbourne-based boutique fund manager SG Hiscock & Company, said while the Fed's announcement was "mildly bearish", the "extremely encouraging" CPI report was having more of an impact on markets.
"From a monetary policy standpoint, the easing of underlying inflation pressures is extremely positive, as it is an easing in inflation that will enable the US Fed to cut rates if economic growth continues to soften," Mr Hogg wrote.
Closer to home, the Australian Bureau of Statistics reported on Thursday the unemployment rate fell by a 10th of a percentage point to 4.0 per cent in May.
Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said the report showed employment growth had been broadly in line with expectations and the figures would probably not swing the Reserve Bank's general assessment of the economy.
The RBA will weigh in directly when its latest two-day meeting concludes on Tuesday. No change in interest rates are expected.
Nine of the ASX's 11 sectors were in the green, all except energy and materials.
Tech was the biggest gainer, up 2.1 per cent as NextDC rose 3.6 per cent and Xero added 2.3 per cent.
Three of the Big Four banks were higher, with CBA gaining 1.1 per cent to $125.48, NAB climbing 0.8 per cent to $35.01 and Westpac adding 0.6 per cent to $26.88. ANZ was the outlier, basically flat at $28.77.
Shares in the ASX itself fell 8.0 per cent to a six-month low of $58.14 as the bourse said it expected to spend up to $180 million a year on technology through 2026/27 as it tries to bounce back from a botched project to replace its ageing share-trading system.
"Continuing to invest in our business is critical to our strategy," ASX chief executive Helen Lofthouse said.
The heavyweight mining sector slid 0.5 per cent after Chinese economic data showed soft consumer demand persisted last month.
BHP dropped 0.7 per cent to $43.20 and Rio Tinto slipped 0.4 per cent to $120.62, while Fortescue rose 0.6 per cent to $23.42.
The Australian dollar was buying 66.45 US cents, from 66.13 US cents at Wednesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index on Thursday gained 34.2 points, or 0.44 per cent, to 7,749.7.
* The broader All Ordinaries rose 39.4 points, or 0.49 per cent, to 8,002.5.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.45 US cents, from 66.13 US cents at Wednesday's ASX close
* 104.37 Japanese yen, from 104.10 Japanese yen
* 61.47 euro cents, from 61.63 euro cents
* 51.97 British pence, from 51.95 pence
* 107.70 NZ cents, from 107.69 NZ cents
