ASX inches closer to record as Fed’s Powell releases the bulls

Alex GluyasMarkets reporter

Aug 25, 2024 – 3.18pm

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Australian shares will be swept up in the global rally unleashed by the US Federal Reserve chairman declaring interest rate cuts are coming, as he tries to engineer a soft landing for the world’s largest economy.

Jerome Powell provided his firmest assurance yet that the central bank has successfully contained inflation, telling the annual Jackson Hole, Wyoming economics symposium that “the time has come for policy to adjust”.

From left: Bank of Canada governor Tiff Macklem, Bank of England governor Andrew Bailey and Federal Reserve chairman Jerome Powell at the Jackson Hole symposium. Bloomberg

The remarks extended a rally on Wall Street on Friday (Saturday AEST), with the S&P 500 climbing to within 1 per cent of its all-time peak. Global equities, as measured by the MSCI All-Country World Index, closed the week out at a record high.

The bullish sentiment is poised to spill over to the Australian sharemarket on Monday, with futures indicating the S&P/ASX 200 will open 0.5 per cent higher. The benchmark index snapped a 10-day winning streak on Friday, inching 3.1 points lower to 8023.9, and is just 1.5 per cent shy of its record.

“Powell’s Jackson Hole speech on the economic outlook was bullish-dovish,” said AMP’s deputy chief economist Diana Mousina. “Given that a September rate cut looks like a done deal now, the question will go to whether the next move in the Fed funds rate should be a 25- or 50-basis-point rate cut.”