ASX 200 Turns Positive After Early Slump as Weak Australian Jobs Data Cools Rate Hike Bets on Thursday

SYDNEY — Australian shares recovered from an early sell-off on Thursday and edged into positive territory after weaker-than-expected employment data prompted investors to scale back expectations for further interest rate increases.

The S&P/ASX 200 was up 7.2 points, or 0.08%, at 8,735.1 as of 1:08 p.m. Sydney time, a sharp turnaround from the morning session.

The benchmark opened lower after a poor night on Wall Street, falling as much as 0.9% to about 8,654 in early trading. It remained in negative territory until the release of official jobs figures at 11:30 a.m., when the market began to climb.

The index closed Wednesday at 8,727.9, down 56 points, or 0.64%, dragged lower by banks, miners and industrial stocks.

Jobs data shifts the outlook

The turnaround followed the release of the Australian Bureau of Statistics' labor force figures for September, which pointed to softness in the job market, including a sharp drop in part-time employment.

The data led traders to pare bets on another interest rate increase by the Reserve Bank of Australia. Bond yields fell sharply in response, with the rate-sensitive three-year government bond yield dropping 7 basis points after the release to 4.8%.

Lower yields tend to support share prices, particularly in sectors such as property and banking that are sensitive to borrowing costs.

The labor market has been softening through 2026. The unemployment rate rose to 4.6% in August, its highest level since November 2021.

Rate hikes in focus

The Reserve Bank has raised interest rates four times this year as it battles stubborn inflation fueled in part by elevated energy prices linked to the conflict in the Middle East. Minutes from its September meeting, released earlier this week, did not rule out further increases.

Commonwealth Bank of Australia chief executive Matt Comyn told shareholders on Wednesday that growth is slowing and inflation remains too high, adding that it will take time for higher interest rates to bring inflation back within the central bank's target range.

Signs of a weakening job market could give the Reserve Bank reason to pause, though some economists have said they are not ruling out another increase. The central bank will also weigh upcoming inflation figures before its next decision.

Tech stocks under pressure

Technology shares were among the weakest performers, following a weak lead from the Nasdaq overnight.

Data center operators were hit hardest. Megaport, Macquarie Technology and NextDC fell sharply after U.S. artificial intelligence cloud provider CoreWeave dropped about 15% on Wall Street, renewing concerns about the AI infrastructure trade.

Bell Potter retained its buy rating on Megaport but trimmed its price target to 26 Australian dollars.

The sell-off in AI-related stocks has weighed on global technology shares this week, alongside rising Treasury yields after U.S. inflation came in hotter than expected on Wednesday.

Energy gains, gold slips

Energy stocks were expected to benefit from higher oil prices overnight. Brent crude rose 0.4% to $106.09 a barrel, while U.S. benchmark crude climbed 1.1% to $95.15.

Gold miners faced pressure after the price of gold fell overnight. Newmont and Northern Star were among the gold stocks on watch.

Global cues

Wall Street had a weak session overnight after the U.S. consumer price index showed annual inflation of 3.7% in September, above forecasts. The hotter-than-expected reading raised concerns that the Federal Reserve could raise interest rates again, pushing Treasury yields higher and weighing on technology stocks.

U.S. bank earnings continued, with Bank of America shares falling sharply after a 17% drop in quarterly profit, dragged down by a $1.2 billion regulatory penalty.

Chip equipment maker ASML's New York-listed shares fell 3.9% despite reporting record sales and raising its outlook.

Company news

Several ASX 200 companies held annual general meetings on Thursday, with investors watching for trading updates.

Shares in Treasury Wine Estates were also in focus.

Bank of Queensland was scheduled to report its full-year results, with investors watching for details on its final dividend, net interest margin and capital management plans after a difficult first half.

Housing market cools

In a further sign of a slowing economy, auction clearance rates in Australia's capital cities fell to their lowest level since June during the past week, according to data cited in market coverage.

Higher interest rates have weighed on borrowing capacity and housing demand, adding to pressure on consumers already dealing with elevated living costs.

Australian dollar steady

The Australian dollar was little changed, trading at about 69.71 U.S. cents.

What's ahead

Investors will continue to monitor the outlook for interest rates in Australia and the United States, as well as developments in energy markets and the Middle East.

Results from Taiwan Semiconductor Manufacturing, due later Thursday, will be closely watched for signals on artificial intelligence demand, which could influence technology stocks globally.

The Australian share market closes at 4 p.m. Sydney time.