Aussie shares hit 1-week high after US inflation report

Australian shares have hit a one-week high after a US inflation report showed signs of cooling.

The S&P/ASX 200 index closed 1.2 per cent higher at 7,454.60 on Wednesday, its highest close since August 18.

The gains were led by financials, with the big four banks all rising more than 1 per cent.

The US inflation report showed that consumer prices rose by 8.5 per cent in July, which was lower than the 9.1 per cent increase in June.

The report also showed that core inflation, which excludes food and energy prices, rose by 5.9 per cent, which was also lower than the 6.4 per cent increase in June.

The lower inflation figures have raised hopes that the US Federal Reserve may not need to raise interest rates as aggressively as previously thought.

This has boosted risk appetite in markets around the world, including Australia.

"The US inflation report was a bit of a relief for markets," said AMP Capital chief economist Shane Oliver.

"It showed that inflation is starting to cool, which means that the Fed may not need to raise interest rates as aggressively as previously thought."

"This has boosted risk appetite in markets around the world, including Australia."

Oliver said that the Australian share market is likely to continue to benefit from the positive global sentiment.

"The Australian share market is likely to continue to benefit from the positive global sentiment," he said.

"However, it is important to remember that the market is still facing a number of challenges, including the war in Ukraine and the rising cost of living."

"Investors should therefore be cautious and not get too carried away by the recent gains."