Bank, healthcare stocks drive Australian shares higher; Fed policy decision eyed

Apr 29, 202406:59 UTC

XJO

XFJ

XHJ

CSL

Key points:

Fed policy decision due May 1
ASX 200 logs best day since April 22
Banks end up 0.6%, healthcare stocks up 1.2%

Australian shares rose on Monday, led by financial and healthcare stocks, tracking gains in Wall Street, while investors keenly awaited the U.S. Federal Reserve's policy meeting this week for further cues on its interest rate trajectory.

The benchmark index S&P/ASX 200 XJO rose 0.8% to 7,637.4 points, its best day since April 22.

The Fed's two-day policy meeting begins on Tuesday. While the central bank is expected to keep rates on hold, the focus will be on its rate outlook.

An array of recent U.S. economic data reinforced expectations of rate cuts not happening before September.

"Fed is going to keep the hawkish view and push back on rate cuts. The current probability is for September cut and maybe two cuts in 2024," said Mathan Somasundaram, CEO of Deep Data Analytics.

Markets are now pricing in a 58.4% chance of the Fed cutting rates in September, as compared to 93.5%, a month ago, according to CME FedWatch Tool.

Domestic data last week showed inflation slowed less than expected in the first quarter, driving investors to push back their interest rate cut expectations.

Mathan added that the Reserve Bank of Australia would be on hold until the U.S. Fed's move on interest rates.

The financial sub-index XFJ rose 0.6%, with the "Big Four" banks ending between 0.3% and 0.8% higher.

Healthcare stocks XHJ advanced 1.2%, with biotechnology major CSL CSL and Ramsay Health Care RHC gaining 0.6% and 2.02%, respectively.

Heavyweight mining stocks XXMM climbed 0.5%, with mining behemoths Rio Tinto RIO and Fortescue FMG adding 0.1% and 0.3%, respectively.

However, shares of global miner BHP group BHP dropped 0.4% on market speculations that it would come up with a sweetened offer for London-listed Anglo American AAL.