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ASX200 rout - What can the 1996 inflation episode teach today?
Tony Sycamore May 19, 2021 5:57 AM
Last week US core CPI hit 3%, its highest level since January 1996. The very same year that I started on the floor of the Sydney Futures Exchange as a trainee bond trader for Macquarie Bank. Share:
The 1996 inflation scare sent the bond market into a six-month tailspin. Yields on benchmark US 10 year bonds rose from around 5.50% to 7% by mid-1996. Not immune from the bond market rout, US equities topped out in May, before falling over 11% into mid-July.
Despite concerns that inflation would continue to surge as the economy strengthened, the then Chairman of the Federal Reserve Allan Greenspan, stared down the bond market vigilantes as well as fellow board members and refused to raise official interest rates.
ASX 200 index closes 0.3% higher; Australian shares extend gains to close near 14-month peak
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Last Updated: Apr 29, 2021, 02:28 PM IST
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Synopsis
The S&P/ASX 200 index closed 0.3% higher at 7,082.3. Gains in tech and gold stocks helped outweigh dismal trading updates from Woolworths and Fortescue Metals.
Agencies
Australia s biggest gold miner Newcrest jumped as much as 2.7% after posting production of 512,424 ounces for the March period, beating the 491,539 ounces tipped by RBC analysts.
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Australian shares closed at their highest level in nearly 14 months on Thursday, extending gains from the previous session when mild inflation data pushed the benchmark index to snap its two-day losing streak.
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Australian shares closed higher on Thursday, joining a rebound in global equities as gold and healthcare stocks advanced, while AGL Energy hit a record low after its chief executive officer resigned. The S&P/ASX 200 rose 0.8 per cent to 7,055.40 in its best day since April 8. It had marked its worst session in nearly two months in the previous session. U.S. stocks bounced on Wednesday after a two-day decline, with the tech-heavy Nasdaq adding 1.2 per cent. MSCI s broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent on Thursday, following a 0.9 per cent decline the previous day. The ASX rebounded across the board, led by a strong reversal in the U.S. equity markets last night, said Brad Smoling, managing director, Smoling Stockbroking.