Finance: ASX edges lower despite oil price surge on US-led airstrikes

The share market edged lower on Friday after hotter-than-expected US inflation numbers raised doubts over the timeline of rate cuts by the US Federal Reserve while tensions in the Red Sea flared.

At the close of trade, the benchmark S&P/ASX200 had fallen 0.1 per cent, or 7.7 points, to 7,498.3, while the broader All Ordinaries eased the same amount to 7,730.5.

The Australian dollar was higher against its US counterpart to buy US 67.03c.

AMP chief economist Shane Oliver said the rally Australian shares experienced from October through to late December was “too far, too fast … leaving them vulnerable to a “short term correction”.

Since the start of 2024, the ASX200 has shed 1.2 per cent of its value.

“A rise in shares was fundamentally supported by ongoing news of falling inflation and central banks pivoting towards a peak in rates and eventual rate cuts and it was also consistent with the normal seasonal rally,” Dr Oliver said.

“However, the extent of the rally has left shares overextended and vulnerable to a pullback as central banks may not start to cut rates as early as markets are assuming.”

The high chance of a recession and the threat of a widening in the Israel-Hamas war also posed major risks, Dr Oliver warned.

Overnight on Wall Street, stocks staged an impressive comeback late in the session to finish slightly lower after hotter-than-expected inflation data raised concerns that inflation might not be cooling as quickly as anticipated.

The US benchmark, the S&P500 eased 0.1 per cent. The Dow Jones and the tech-heavy Nasdaq were unchanged.

Locally, energy stocks were the strongest performers, adding 0.5 per cent, as a US-led coalition, which included Australia, launched airstrikes on Yemen-based Houthi rebels.

Since mid-November, the militant group has attacked commercial ships traversing the Red Sea in support of Hamas over its war with Israel, causing oil prices to see-saw as the risk premium associated with the conflict varies.

On Friday, Brent crude, the international benchmark, added 1.7 per cent to $78.32 a barrel.

Beach Energy rose 2.9 per cent to $1.58, Santos climbed 1.5 per cent to $7.55, and Woodside rose 0.5 per cent to $31.29.

The utilities sector was the worst performing, falling 1.4 per cent as AGL slipped 2.2 per cent to $9.05 and Origin Energy sank 0.7 per cent to $8.26.

In company news, Taxi service operator A2B tumbled 32.6 per cent to $1.42, its worst day ever, after it announced a fully franked dividend of 5c per share and an additional special dividend of 55c per share in August 2023.

Shares in Syrah Resources added 1.9 per cent to 54c as the graphite producer said active anode material production would commence at its facility in Vidalia, Louisiana by the end of January. The project’s start has been delayed by cold weather.

Software company Nuix slipped 12.9 per cent to $1.83 after announcing it expected lower earnings in the first half of the 2024 financial years after the company was hit with legal action by the corporate watchdog.

Core Lithium was the top performer on the ASX200, vaulting 7.7 per cent to 21c, after its shares tumbled 17.4 per cent on Monday.

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