Australia stocks hit record high as RBA rate cut bets grow

Investing.com-- Australia’s ASX 200 stock benchmark soared to a record high on Friday, boosted chiefly by growing bets that the Reserve Bank of Australia will cut interest rates further amid signs of weakness in the economy. 

The ASX 200 rose more than 1% to a record high of 8,745.20 points, extending gains from the prior session. Gains were largely broad-based, with the country’s heavyweight bank and mining stocks all trading positive. 

The ASX’s rally this week was sparked by a dismal labor report for June, which showed growth in Australia’s labor market stalled for a second consecutive month. Unemployment also unexpectedly rose to a near four-year high. 

The labor market, along with consumer inflation, is a major consideration for the RBA in cutting rates. The central bank slashed its benchmark rate by a total of 50 basis points to 3.85% this year, amid signs of steadily falling inflation.

But the central bank unexpectedly left rates unchanged last week, stating that it needed more time to gauge the path of the Australian economy and inflation. The central bank also cited uncertainty over the impact of U.S. trade tariffs. 

Thursday’s labor data, however, underscored growing weakness in the labor market, which in turn is likely to push the RBA towards more rate cuts. 

ANZ analysts said the June labor report was soft, and was likely to spur more easing by the RBA, with a 25 bps cut penciled in for August. 

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

Capital Economics analysts also called the June labor report soft, and said they expected outsized rate cuts by the RBA.

“The sharp rise in unemployment in June makes the RBA’s decision to leave rates on hold earlier this month look like a policy error. We’re increasingly convinced that the incoming data flow will prompt the Bank to cut rates further than most are currently anticipating,” Capital Economics analysts wrote in a note. 

Australian markets also tracked gains in broader global stocks, especially after Wall Street hit record highs on Friday. 

 

Which stock should you buy in your very next trade?

AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

Unlock ProPicks AI