ASX 200 Climbs 0.4% at Midday as Fed Holds Rates, Microsoft Results Ease AI Fears and Star Shares Jump on Fine

SYDNEY, — Australian shares rose on Thursday. Investors welcomed strong cloud computing results from Microsoft that eased concerns about an artificial intelligence bubble and weighed the U.S. Federal Reserve's decision to hold interest rates steady.

The S&P/ASX 200 index was up 35.3 points, or 0.40%, at 8,882.6 at 1:23 p.m. AEDT. The benchmark opened 0.3% higher at 8,870.9 and extended its gains through the morning.

The index closed nearly flat on Wednesday at 8,847.3, after giving up early gains following hotter-than-expected inflation data.

Fed holds, signals hikes ahead

The Federal Reserve kept its benchmark interest rate in a range of 3.75% to 4% on Wednesday in Washington, in a 10-2 vote. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring a rate increase.

Fed Chair Kevin Warsh gave no clear guidance on the path for rates but said the central bank had not yet achieved price stability. "We're working on it," he said.

Markets now see about an 80% chance of a Fed rate hike at its December meeting, with another possible by March.

Commonwealth Bank of Australia currency strategist Joseph Capurso said he expects the Fed to raise rates in December and again in March 2027, taking the range to 4.25% to 4.50%.

"The bottom line is inflation is too high despite lower tariffs," Capurso said.

Wall Street finished mixed overnight. The Dow Jones Industrial Average rose 0.17% and the S&P 500 gained 0.08%, while the Nasdaq Composite slipped 0.16%.

Microsoft eases AI worries

Sentiment improved after Microsoft reported quarterly results after the U.S. market close. Revenue from its Azure cloud computing business grew 48% to $33.17 billion, ahead of analysts' estimates of about $32.84 billion and up from 42% growth in the previous quarter.

Analysts said the results helped ease concerns that massive spending on AI infrastructure might not pay off.

"The AI race is no longer rewarding whoever spends the most, it's rewarding whoever can show the receipts," said Josh Gilbert, a market analyst at eToro.

Microsoft's capital spending came in about $6.5 billion below estimates, which the company attributed to delays in data center capacity. Alphabet was also reporting results after the U.S. close.

The results support Australian technology and data center stocks, which have been volatile amid swings in global AI sentiment.

Star Entertainment rallies

Shares of casino operator Star Entertainment jumped as much as 9.6% to 14.3 cents after resuming trading. The company had been in a trading halt to respond to a court-imposed penalty.

The Federal Court ordered Star to pay a A$260 million fine over breaches of anti-money laundering and counter-terrorism financing laws, in a civil case brought by financial crimes regulator AUSTRAC in 2022.

The penalty is more than double what Star's lawyers had said the company could afford. Star said it would pay in four installments over 19 months, and that the penalty was broadly in line with provisions it had already set aside. It said it would continue to operate as a going concern.

The company is still in talks with lender WhiteHawk over a A$390 million credit facility agreed in May.

Chairman Soo Kim said current management had no involvement in the conduct at issue.

Company news

Critical minerals company IperionX led early gains after reporting positive September-quarter results.

Electronics retailer JB Hi-Fi was flat at A$70.66 after reporting that first-quarter sales fell 0.4%, a sign of pressure on consumer spending as Australians face rising living costs and the prospect of higher interest rates.

Commodities

Gold traded around US$4,070 an ounce, recovering further from last week's dip below US$4,000. That supported gold miners.

Oil prices rose after reports of an attack on a Saudi refinery, with Brent crude climbing to about US$115.48 a barrel from about US$113.75 earlier. Iron ore was steady at about US$90.70 a ton.

Dollar firms ahead of RBA

The Australian dollar rose about 0.5% to around 70.57 U.S. cents.

Investors are focused on the Reserve Bank of Australia's next decision on Tuesday, Melbourne Cup Day. Data released Wednesday showed consumer prices rose 4.3% in the 12 months to September, up from 4% in August, while the trimmed mean measure of underlying inflation was 3.6%.

The figures sharply increased expectations that the RBA will raise its 4.60% cash rate for a fourth time this year. Market pricing pointed to a hike probability of about 80% to 90% after the data.

Small business pressures

Data from accounting software company Xero showed small business conditions were flat in the September quarter.

"The September quarter tells us small business conditions haven't worsened, but they also haven't improved," said Xero economist Louise Southall.

Busy week ahead

Investors will also watch Alphabet's results and earnings from Amazon and Meta Platforms later this week, along with the Bank of Japan's policy decision on Friday.

Samsung Electronics reports quarterly results on Thursday, a day after South Korean rival SK Hynix posted record profit that lifted chip stocks across Asia.

This article is for information only and does not constitute financial advice.