ASX 200 afternoon report: 29 January 2025

The ASX 200 trades 70 points (0.89%) higher at 8470 at 2.00pm AEDT.

ASX 200 reaches seven-week high

The ASX 200 surged today to reach a seven-week high of 8481.6, following a softer-than-expected fourth-quarter (Q4) consumer price index (CPI) reading. This development has intensified calls for the Reserve Bank of Australia (RBA) to implement its first interest rate cut since November 2020, potentially occurring in February.

Inflation data influences RBA decision

Headline inflation rose by 0.2% over the quarter, compared to the consensus of 0.5%, allowing the annual rate to ease to 2.4% from 2.8%.

Michelle Marquardt, head of prices statistics at the Australian Bureau of Statistics (ABS), said, ‘The December quarter’s rise was the same as the 0.2% increase in the September 2024 quarter. These rises were the lowest recorded since the June 2020 quarter, when the CPI fell during the Covidd-19 outbreak when childcare was free.’

The RBA's preferred measure of inflation, the trimmed mean, rose by 0.5% in the quarter (consensus was 0.6%), allowing the annual rate to decline to 3.2% from 3.6% previously, marking an eighth consecutive quarter of lower annual trimmed mean inflation.

Market positions on potential rate cuts

This time last year, the annual rate of trimmed mean inflation was 4.2%. After another decisive step lower in Q4, inflation is close to the RBA's 2 - 3% target range and significantly below the 3.6% forecast in its November Statement on Monetary Policy.

The rates market is pricing a 75% chance of a 25 basis point (bp) rate cut at the RBA's Board meeting on 18 February, which would reduce the official cash rate to 4.10%. More importantly, the rates market is factoring in 86 bp of rate cuts for 2025, which would see the cash rate end the year at 3.50%. Such a reduction would provide relief to the Australian Government during an election year, the RBA, and mortgage holders.

Australia all groups CPI and trimmed mean chart

ASX 200 stocks

Technology sector

While we agree that DeepSeek’s emergence is a positive development for accelerating AI adoption in daily life, we believe its impact on lofty US tech stock valuations remains uncertain.

In this context, if any of the four major tech companies reporting this week - Microsoft, Meta, Tesla, or Apple - fail to meet expectations, investors may need to reconsider their commitment to overweight positions in US tech stocks. Nonetheless, local tech stocks gained.

• Seek jumped 5.28% to $23.33
• Appen gained 3.88% to $2.54
• Block (owner of Afterpay) advanced 4% to $141.82
• Wisetech Global increased 3.77% to $124.1

Property sector

Property and banking stocks saw significant gains, buoyed by expectations of an impending mini rate-cutting cycle by the RBA.

• Mirvac surged 3.59% to $2.02
• GPT Group rose 2.98% to $4.66
• Stockland increased 2.44% to $5.25
• Scentre advanced 2.08% to $3.69

Banking sector

• ANZ led with a gain of 1.15% to $30.78
• Macquarie added 1.13% to $238.55
• Westpac went up 1.08% to $33.76
• CBA increased 0.63% to $160.23
• NAB rose 0.33% to $39.95

ASX 200 technical analysis

The ASX 200 has been trading higher within a bullish trend channel for the better part of 12 months.

If the ASX 200 stays above the trend channel support at approximately 8050, it is expected to retest its record high of 8514. After reaching this level, it may encounter trend channel resistance around 8630.

ASX 200 daily chart

• _{Source: TradingView. The figures stated are as of 29 January 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}