ASX Miners Roar Back as Inflation Looms and Wall Street Bets on AI

Australian equities: what moved the ASX 200?

Australia’s sharemarket climbed to a seven-week high on Tuesday, 27 October, as a powerful rally in mining stocks outweighed concerns about inflation and the prospect of further interest rate increases. The ASX 200 rose 40.2 points, or 0.46%, to 8,850.1, recovering from an early decline of as much as 0.4%. Materials shares led the advance, with the sector gaining 2.78%.

BHP Group (ASX: BHP) surged 4.26% and Rio Tinto (ASX: RIO) advanced 2.53%, helping lift the broader market as copper prices remained firm. The strength in major miners suggests market participants are still prepared to back resource companies despite uncertainty about Chinese demand. However, Wednesday’s Australian inflation release could quickly change the mood if price pressures prove more persistent than expected.

Star Entertainment Group (ASX: SGR) jumped 13.04% after reporting a substantial improvement in quarterly earnings, moving from a $13 million loss to a $12 million gain. The result offers a tentative sign of operational improvement, although regulatory challenges and the sustainability of its recovery remain important considerations. CSL (ASX: CSL) rose 0.84% despite reporting a 1% revenue decline and a $2.6 billion net loss, while Woodside Energy (ASX: WDS) gained 0.27% after agreeing to sell its Greater Sunrise interest to TIMOR GAP for consideration of up to $200 million, with completion targeted for the first half of 2027.

The contrasting performance highlights a market increasingly driven by individual company developments and sector rotation rather than a uniform improvement in economic conditions.

The Australian dollar, bonds and the RBA

The Australian dollar traded around US70.22 cents, supported by firmer domestic equities and demand for resources exposure. Australian government bond yields remained elevated, with the 10-year yield around 5.16% in the latest available market snapshot, keeping pressure on borrowing costs and interest-rate-sensitive valuations.

The Reserve Bank of Australia’s cash rate stands at 4.60%. Annual inflation was 4.0% in August, above the central bank’s target range, and Wednesday’s September-quarter consumer price index will be crucial in assessing whether another increase is warranted at the November meeting.

We see inflation as the immediate domestic risk. A softer reading could ease pressure on households and rate-sensitive sectors, while an upside surprise could strengthen expectations of another rate rise and weigh on property, consumer discretionary and highly valued growth shares.

Global markets: China, Asia and Europe

Asian markets rallied as renewed enthusiasm for artificial intelligence lifted technology shares ahead of major earnings announcements. South Korea’s Kospi surged 3.9%, its strongest daily gain since early February, while Japan’s Nikkei 225 rose 1.9%. The gains followed a stronger Wall Street session and renewed interest in the commercial prospects of AI.

China presented a more cautious picture. The Shanghai Composite edged up 0.2%, while the CSI 300 finished broadly unchanged at 4,103.54. Technology shares remained under pressure as market participants weighed economic concerns against potential policy support. For Australia, the key question is whether Chinese stimulus translates into stronger construction, steel production and demand for iron ore, rather than merely lifting short-term market sentiment.

European markets faced a busy week of central bank decisions and corporate earnings. The European Central Bank and Bank of Japan are expected to maintain their current policy settings, although inflation risks could limit the scope for a more accommodative outlook.

Wall Street: US stocks and the Federal Reserve

Wall Street finished higher on Monday, with the S&P 500 gaining 0.70% to 7,676.77, the Nasdaq Composite rising 0.82% to 26,169.38 and the Dow Jones Industrial Average adding 0.28% to 52,361.58.

Technology shares benefited from renewed optimism surrounding AI, including developments linked to Anthropic’s potential public listing. However, enthusiasm comes with a qualification: the enormous cost of AI infrastructure raises questions about how quickly spending will translate into sustainable profits.

The US 10-year Treasury yield was near 4.99% in Asian trading, keeping financing costs elevated. The Federal Reserve is widely expected to leave interest rates unchanged this week, but persistent inflation could complicate the outlook. Results from Alphabet, Microsoft and Amazon will help determine whether strong AI spending can justify current expectations for technology earnings.

Commodities: gold, oil and industrial metals

Gold traded around US$4,014 an ounce in Asian trading, while Brent crude futures hovered near US$115 a barrel. Gold remains sensitive to real yields, the US dollar and geopolitical uncertainty, while oil prices continue to reflect supply risks associated with the conflict involving the US, Israel and Iran.

The combination of elevated oil prices and high bond yields is particularly uncomfortable for markets. More expensive energy can reinforce inflation, potentially delaying monetary easing even as it increases operating costs for transport, manufacturing and resource companies.

Copper’s relative resilience is encouraging for Australian miners, but stronger share prices alone do not confirm a sustained recovery in Chinese industrial demand. Iron ore and steel-market developments remain important indicators for the major diversified miners.

What to watch next

Wednesday’s Australian CPI release is the immediate catalyst, followed by the Federal Reserve’s policy decision and guidance later in the week. Markets will also scrutinise results from major US technology companies for evidence that AI expenditure is generating adequate returns.

Our assessment is cautiously constructive on resources, but the broader outlook remains conditional. If inflation moderates and Chinese demand improves, miners could continue supporting the ASX 200. If inflation surprises higher while AI earnings disappoint, elevated bond yields could undermine the rally. The crucial test is whether stronger share prices are followed by better economic and earnings evidence.