Index Update: The S&P/ASX 200 closed higher on Tuesday, rising 95.80 points, or 1.10%, to 8,795.70 to mark a new 20-day high. The benchmark has advanced 2.29% over the past five sessions and now sits 3.51% below its 52-week peak. Gains were broad-based, with all 11 sectors finishing in positive territory alongside the benchmark. A-REITs led the market, climbing 3.10% on the day and extending its five-day gain to 4.11%. The Australian share market reached a six-week high on Tuesday as buying continued ahead of the holiday period.

Macro Update: Australia’s central bank flagged a potential risk of interest rate increases in 2026 as inflation pressures picked up, according to minutes from the Reserve Bank of Australia’s December policy meeting. Board members noted that recent higher-than-expected inflation readings in October and the September quarter had tilted risks to the upside. However, they cautioned that some drivers may be temporary and said more data, including fourth-quarter figures due in late January, would be needed to assess persistence before considering any policy tightening.

Top Market Movers: Australian equities saw mixed moves on Tuesday. DroneShield Limited (ASX:DRO) surged 9.0% to AUD 3.270, followed by Goodman Group (ASX:GMG), up 8.25% to AUD 31.630, and Austal Limited (ASX:ASB), which added 6.37% to AUD 7.010. On the downside, Eagers Automotive (ASX:APE) slipped 2.75% to AUD 24.800, EVT Limited (ASX:EVT) fell 1.87% to AUD 13.100, and Capricorn Metals (ASX:CMM) declined 1.76% to AUD 14.520.

Commodity Update: The Japanese yen strengthened on Tuesday amid broad U.S. dollar weakness after authorities issued their strongest warning yet, signalling Tokyo’s readiness to intervene as the currency hovered near recent lows against major peers. Commodities advanced, with gold rising 1.17% to USD 4,521.65, silver up 1.85% to USD 69.77, and copper edging 0.04% higher to USD 11,925.00. Brent crude slipped 0.10% to USD 61.98 after sharp prior-session gains.

Our Stance: Australian equities extended their upward momentum, with the S&P/ASX 200 posting a six-week and 20-day high as broad-based buying lifted all sectors, led by A-REITs. The rally reflects improving near-term sentiment heading into the holiday period, supported by strength in selected defence, infrastructure, and property names. However, macro signals remain mixed. The Reserve Bank of Australia’s acknowledgement of upside inflation risks and a potential 2026 rate hike introduce a note of caution, even as policymakers emphasise the need for further data. Globally, firm technicals in India’s Nifty 50 also point to resilient risk appetite. Our stance: near-term momentum favours equities, but gains may moderate as markets balance holiday optimism against evolving inflation and policy risks.

In the latest session, the S&P/ASX 200 Index advanced 95.80 points to close at 8,795.70, supported by a modest bullish candlestick and strong trading volumes, reflecting sustained investor confidence. On the daily chart, the index is trading above its 50-period SMA, which continues to act as a key short-term dynamic support. Immediate support is located around 8,550.70, and holding above this level is critical to maintain the near-term positive structure. On the weekly timeframe, the index remains comfortably above its 50-period SMA, underscoring a constructive medium- to long-term outlook. Overall, the technical setup suggests scope for further upside as long as key support levels remain intact.

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