ASX rises, Fed keeps rates on hold; Star shares jump

The Australian sharemarket has made a bright start to the session on the back of a positive lead from Wall Street after the Federal Reserve, as expected, kept interest rates on hold.

The S&P/ASX 200 was up 38.8 points, or 0.4 per cent, to 8886.1 in early trade. Wall Street closed in positive territory after the Federal Reserve opted to delay any changes to borrowing costs until after next week’s US midterm elections and awaiting further data on the path of inflation. The Australian dollar was trading at US70.49¢.

After strong gains overnight, oil prices dipped in early Asian trade as traders weighed fresh diplomatic efforts in the Middle East to avert a potential restart of US military strikes on Iran. West Texas Intermediate fell toward $US102 a barrel, after rising almost 3 per cent in the previous session, while Brent closed near $US115. Iran’s Foreign Minister Abbas Araghchi said that Tehran continued to give diplomacy a chance, and the Wall Street Journal reported US Vice President JD Vance had reached out to Mohsen Rezaei, secretary of the nation’s top security body.

President Donald Trump told Axios that negotiations were taking place through mediators but stressed he didn’t know whether they would bear fruit. “We need to finish the job – either through a deal or another way – we will find out if negotiations can succeed,” he was quoted as saying.

Energy stocks are higher on the ASX, with Woodside Energy up 1.1 per cent, Santos rising 1 per cent and refiner Ampol adding 0.8 per cent in early trade.

Financial stocks advanced across the board with National Australia Bank and Westpac up 1.3 per cent while Commonwealth Bank added 0.7 per cent and ANZ Bank rose 0.6 per cent.

Embattled gaming giant Star Entertainment jumped 7.7 per cent on Thursday morning, as it emerged from a trading halt that was entered into before the Federal Court announced a $260 million fine for the company on Wednesday. Star says it is talking to its lender after copping a fine for money laundering breaches, but it will be able to cover the cost of the penalty. The hefty penalty was imposed following a lawsuit from the financial crimes watchdog, AUSTRAC.

Wesfarmers lost 2.9 per cent after releasing a quarterly update, with the retail giant flagging slowing sales at hardware powerhouse Bunnings. JB HiFi was up 0.8 per cent after releasing its quarterly update, with sales slipping at its Australian stores but rising in New Zealand.

Mining stocks are mixed with Fortescue rising 0.5 per cent, BHP flat and Rio Tinto slid 0.6 per cent. Gold miners rose after the price of the precious metal erased losses after the Fed decision to hover around $US4050 an ounce. Northern Star and Evolution Mining per cent are 0.5 per cent higher in early trade.

Technology stocks are mixed with WiseTech adding 0.6 per cent and Xero up 0.2 per cent but Codan slid 0.2 per cent lower.

On Wall Street, the S&P 500 rose 0.3 per cent, the Dow Jones Industrial Average added 0.2 per cent and the Nasdaq composite rose 0.3 per cent. In the bond market, the two-year Treasury yield initially jumped after the Fed announcement, but reversed course after traders pared expectations for coming hikes to rates.

In a 10-2 decision, the Fed said it would maintain its benchmark interest rate within the current 3.75 per cent-4.00 per cent range while acknowledging that inflation “remains elevated,” upgrading its assessment of the economy, and hinting that further rate hikes may be coming depending on the performance of inflation.

“The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 per cent goal,” the rate-setting Federal Open Market Committee said in its latest policy statement. “The Committee will deliver price stability.”

At a news conference following the announcement, chair Kevin Warsh said the Fed has “started to see some changes in financial and credit conditions. They have tightened for some businesses and households.”

The Fed raised its benchmark rate last month for the first time in three years, defying President Donald Trump’s demands for rate cuts, in an effort to get inflation back to its 2 per cent target in a “timelier” manner. The Fed is tasked by Congress to combat inflation, and it does so by lifting rates to slow borrowing and spending and cool price increases. The statement leaves the Fed’s next moves unclear, even though officials last month penciled in another rate hike for this year. Wall Street investors have also priced in a rate hike in December, according to futures markets.

Fed Governor Lisa Cook, currently targeted by President Donald Trump for removal from the central bank, dissented in favour of a quarter-percentage-point rate hike, as did Cleveland Fed President Beth Hammack, a consistently hawkish voice who also dissented in July for the same reason.

Wall Street cares so much about interest rates because they are one of the main levers that set prices for stocks. The other big variable is how much profit companies are making, and several companies rallied Wednesday after joining the list of those beating analysts’ expectations for the summer.

Etsy climbed 5.5 per cent after its profit for the latest quarter blew past analysts’ forecasts. CEO Kruti Patel Goyal said the online marketplace saw growth in active buyers from prior-year levels for the first time in two years, while its active seller base grew at its fastest rate in two years.

Stocks in the artificial-intelligence industry were also relatively solid with Micron Technology the strongest force lifting the S&P 500 with a 5.9 per cent gain. But after the closing bell, Alphabet reported a higher cash burn than analysts expected as it spends heavily to boost capacity for its cloud business, sending its shares down more than 6 per cent in extended trading.

Outside of tech and earnings, Wendy’s soared 15.2 per cent to $US7.07 after Trian Fund Management, run by investor Nelson Peltz, offered to buy the chain for $US7.35 per share in cash.

AP with Reuters, Bloomberg

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.