Australian Shares Surge as Banks and Real Estate Benefit from Softer US Inflation

Dec 19 - Australian shares rose on Friday, led by banks and real estate stocks, as investors assessed overnight gains in Wall Street after a softer U.S. inflation report raised expectations of Federal Reserve rate cuts.

The S&P/ASX 200 index was up 0.6% at 8,653.30 points, as of 2330 GMT. However, the benchmark is slated for its steepest weekly drop in four, if the current momentum persists. The U.S. annual consumer inflation for the year ended November fell short of expectations on Thursday, boosting expectations for interest rate cuts. That, in turn, lowers global bond yields and eases financial conditions worldwide, including in Australia.

The moderation in the print was likely due to a 43-day U.S. federal government shutdown. Financials gained 1% on the day, with the 'Big Four' banks adding between 0.6% and 1.3%.

At home, however, hopes for rate cuts are fading, as sticky inflation and a hawkish Reserve Bank of Australia are likely to keep policy firmly on hold. Investors are currently pricing in a 25% chance that the central bank will raise interest rates to 3.85% at its February meeting.

Real estate stocks advanced 1%, hitting their highest level since December 4 and poised for a second consecutive weekly gain. Data centre landlord Goodman Group and NEXTDC climbed 1.1% and 1.2%, respectively.

Capping gains on the benchmark, miners lost 0.4% and were poised to snap a three-week streak of gains. Mining giants Rio Tinto, BHP and Fortescue added between 0.4% and 1%. Gold-linked stocks sank 1%, while energy stocks lost 0.5% and were on track for their worst weekly decline since early April, down 6.3%. Energy producer Santos lost 0.7% following the appointment of Lachlan Harris as its chief financial officer.

Australian tech stocks climbed as much as 2.6% in their best session since November 27, shadowing an overnight surge in their Wall Street peers. New Zealand's benchmark S&P/NZX 50 index rose 0.4% to 13,313.46 points.