Why has the ASX 200 jumped to its highest level in 3 weeks?

The Aussie share market is having a strong session on Wednesday.

The S&P/ASX 200 Index (ASX: XJO) is currently up 0.96% to around 8,792 points after climbing as high as 8,797 points earlier today.

That puts the benchmark at its highest level in around 3 weeks and has it knocking on the door of 8,800 points again.

There’s plenty of buying across the market as well.

At the latest check, 149 shares were trading higher, compared with just 44 in the red and 7 unchanged.

But what I find interesting is where the rally has come from.

Wall Street didn’t give the local market much to work with overnight, with the Dow Jones Industrial Average Index (DJX: .DJI), S&P 500 Index (SP: .INX), and Nasdaq Composite Index (NASDAQ: .IXIC) all finishing slightly lower.

Instead, it appears investors have found something to like much closer to home.

Inflation comes in below expectations

The big move higher came shortly after the latest inflation figures landed at 11:30am AEST.

The Australian Bureau of Statistics (ABS) revealed that the Consumer Price Index (CPI) rose 4% over the 12 months to August.

That’s up from 3.5% in July and is the highest annual inflation rate since May 2024.

But there was some better news in the numbers.

Economists had been expecting headline inflation to come in at 4.1%, while prices rose 0.4% during August.

That compares with the 0.5% increase economists had predicted.

Underlying inflation was also slightly softer.

The trimmed mean CPI rose 0.2% for the month, below forecasts for a 0.3% increase, while the annual rate remained at 3.6%.

And that was enough to get investors buying.

Bond yields moved lower following the release.

Traders also scaled back expectations for another interest rate hike in November.

That comes just one day after the Reserve Bank of Australia (RBA) lifted the cash rate by 25 basis points to 4.6%.

ASX shares rally

The shift in interest rate expectations has helped lift shares across much of the market.

Northern Star Resources Ltd (ASX: NST) is leading the way, with its shares up 6.74% to $24.86.

The gold miner is rallying amid reports that Gold Fields could return with an improved takeover offer after its initial proposal was rejected.

REA Group Ltd (ASX: REA) shares are also having a good day, climbing 4.55% to $155.57 after receiving a broker upgrade from Bell Potter.

Elsewhere, Goodman Group (ASX: GMG) shares are up 2.92% to $26.94, while Wesfarmers Ltd (ASX: WES) shares have gained 2.82% to $76.45.

The big miners are also helping push the index higher.

BHP Group Ltd (ASX: BHP) shares are up 0.9% to $61.18, while Rio Tinto Ltd (ASX: RIO) shares have added 0.95% to $165.93.

The post Why has the ASX 200 jumped to its highest level in 3 weeks? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group and Wesfarmers. The Motley Fool Australia has recommended BHP Group, Goodman Group, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.