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Investing.com-- Australia’s ASX 200 hit a record high on Thursday after weaker-than-expected employment data ramped up bets that the Reserve Bank of Australia will need to cut interest rates further.
The ASX 200 surged 1.3% to a record high of 9,108.70 in morning trade.
Australian employment levels grew less than expected in September while unemployment unexpectedly jumped to 4.5%, a four-year high.
Employment figures for August were also revised lower, indicating that the labor market was cooling more rapidly than seen earlier.
But weakness in the labor market gives the RBA more impetus to cut interest rates, with markets now pricing in a greater chance that the central bank will cut interest rates in early-November.
The RBA had left rates unchanged in its late-September meeting, and said that the labor market and inflation remained its biggest considerations for cutting rates.
Signs of sustained weakness in the labor market could push the RBA into cutting rates further, after about 75 basis points of cuts so far in 2025.
The RBA’s rate cuts were a major support for Australian markets this year, helping the ASX hit a series of records despite signs of cooling economic growth. Major bank stocks were boosted by bets on improving credit activity, while other sectors, including miners, advanced on the prospect of increased market liquidity.
Overnight index swaps data showed traders now pricing in an over 80% chance the RBA will cut rates in November, up from a less-than 50% chance seen on Wednesday.
Shane Oliver, head of Investment Strategy and chief economist at wealth manager AMP, said that Thursday’s data “adds to confidence in our base case for a Nov rate cut.”
Oliver noted that upcoming third-quarter consumer price index inflation data was now a key hurdle, but could read lower than feared, granting the RBA more headroom to ease.
Capital Economics analysts were less convinced, warning that “given the Bank’s ongoing concerns about the stickiness of inflation, an upside surprise in the Q3 CPI data due at the end of the month could still tilt the scales in favour of a hold.”
They also noted that it was possible the RBA would see September’s unemployment spike as a “one-off.”