The ASX recovers as concerns about rapid US rate hikes and a bank crisis fade

The Australian share market has recovered slightly from yesterday’s heavy losses, while the Australian Energy Regulator has revealed that power prices in several states will rise by around 20%.

Wall Street recovered overnight as largely on-target inflation data and fading fears of banking sector contagion calmed investors’ nerves.

On our live blog, you can follow the trading day as it happens.

The Australian share market has finished trading with solid gains, essentially mirroring Wall Street’s relief rally.

The ASX 200 finished 0.9% higher, at 7,068 points.

PEXA (+6.4%), Link Administration (+6%), Xero (+4%), and Block (+3.9%) were among today’s best-performing stocks, as were coal miners Coronado Global Resources (+5.4%) and Whitehaven Coal (+3.7%).

On the other hand, miners such as Evolution Mining (-3.2%) and Chalice Mining (-1.8%), as well as Domino’s Pizza (-1.7%), Allkem (-1.5%), and Imugene (-4%), were among the worst performers.

Investors re-entered the stock market as concerns about banking sector contagion abated (following the failure of Silicon Valley Bank last week).

Investors were also relieved after the US inflation report for February, released on Tuesday (local time), showed consumer prices rising by 0.4% (a 6% year-on-year increase).

Rate hike bets in the United States
This was consistent with analyst expectations, as there were concerns that stronger-than-expected data would prompt the Fed to pursue jumbo-sized (50 basis point) hikes to combat inflation.

Markets were bracing for the return of large Fed hikes as recently as last week, but the rapid collapse of SVB has changed those expectations, with the market pricing in an 80% chance of a 25 basis point hike next week.

The US bond market has recovered from its recent slump.
Following sharp declines at the start of the week, US Treasury yields extended their gains into Asia-Pacific trading hours.

The 10-year Treasury note yield rose 3.8 basis points to 3.674%.

The two-year US Treasury yield, which typically moves in lockstep with interest rate expectations, rose 6.9 basis points to 4.294% (still well below last week’s peak of 5.084%).

This was an improvement from yesterday, when the US two-year bond yield fell by the most in three days since 1987 (as investors fled to safety in the aftermath of Silicon Valley Bank’s failure).

China’s data lifted the Australian dollar, confirming economic recovery.

By 3:10pm AEDT, the Australian dollar had risen 0.2% to 66.95 US cents.

It had risen as high as 67.1 US cents earlier today before falling slightly.

The boost came after China released its most recent data, which confirmed that the country’s economy was recovering from the effects of prolonged COVID lockdowns.

Retail sales increased 3.5% year on year in the first two months, reversing a 1.8% annual decline in December. The outcome was consistent with analysts’ expectations.

The National Bureau of Statistics (NBS) reported that industrial output was 2.4% higher in January-February than the previous year. (This was slightly below expectations for a 2.6% gain, according to a Reuters economist poll).

However, despite a slew of supportive government policies, property investment fell again in January-February as home buyers and developers remained cautious.

This mixed data showed an uneven recovery in economic activity following China’s abrupt abandonment of its three-year-long campaign to control COVID-19 late last year.

It indicated “consistent rather than accelerating momentum,” according to Zhou Hao, chief economist at Guotai Junan International. It indicated that strong policy support was required to unlock the potential for growth, he said.

OpenAI is about to release a new AI model.

OpenAI, a startup tech company, has announced that it will begin to release a powerful artificial intelligence model known as GPT-4, paving the way for more competition between Microsoft and Alphabet’s Google.

OpenAI, the company behind the chatbot sensation ChatGPT, stated in a blog post that its latest technology was “multimodal,” implying that it could generate content in response to both image and text prompts.

The text-input feature will be available with a waitlist to ChatGPT Plus subscribers and software developers, while the image-input capability will remain a preview of its research.

The EPA’s concerns about Woodside’s emissions timeline

West Australia’s environmental watchdog is concerned that a major petrol plant in the Pilbara will not reduce its carbon dioxide emissions quickly enough to contribute to the global effort to limit global warming.

The Environmental Protection Authority has expressed concern that Woodside’s Pluto Liquid Natural Gas facility (on the Burrup Peninsula, approximately 1,500 kilometres north of Perth) is only making minor reductions to its proposed emissions between 2030 and 2050.

The regulator also states that there is a “urgent” need for an investigation into imposing conditions on the facility to ensure that its emissions do not hasten the weathering of World-Heritage-listed rock art on the peninsula.

On Monday, the EPA issued a report outlining its concerns about how quickly Woodside would reduce emissions at Pluto and the five-year targets it set to meet milestones.