The Australian sharemarket climbed to a fresh post-GFC high following another bullish performance by offshore equity markets and modest domestic December-quarter GDP growth of 0.6 per cent that was saved by a bounce in exports.
The S&P/ASX 200 index climbed one per cent at its peak but dropped back to finish 41.4 points, or 0.82 per cent, up at 5116.8 points.
The major banks again hit record highs as domestic and offshore investors continued to snap up high yielding stocks.
Overnight the US Dow Jones industrial index hit a record high as investors wagered ongoing injections of liquidity into the financial system by the US Federal Reserve would suppress interest rates and drive demand for higher yields and risk assets.
December-quarter GDP met forecasts as productivity improved and hours worked contracted by 0.1 per cent, down 0.3 per cent over the year.
“The high Australian dollar is eroding the competitiveness of trade exposed sectors, a significant negative for the economy,” Westpac economists said.
“This is weighing on the labour market.”
Consumer spending weakness over the second half of 2012 was “particularly striking” as consumption rose by only 0.2 per cent in both the last two quarters and the household saving ratio held above 10 per cent.
Forex.com analyst Chris Tedder said Australia’s terms of trade continued to decline and consumption and income growth were weak or non-existent.
“Overall, the report tells us there isn’t enough of a rebalancing taking place in non-mining parts of the economy,” he said.
The Australian dollar rose 0.3¢ to $US1.0295 following the data release as the markets pared rate cut hopes, but it slipped back to $US1.0275 as the US dollar gained traction against other currencies.
The Shanghai composite index was up 0.3 per cent at the close of the ASX as investors positioned for.
In Tokyo the Nikkei index was up 1.7 per cent.
Westpac economist Huw McKay wrote in a report that the lowering in China’s M2 money supply target to 13 per cent from 14 per cent and inflation from 4 per cent to 3.5 per cent “formally signals an end to any perception of an accommodative tilt to monetary policy”.
He said the Chinese economy would peak as expected in the September-quarter and slow into 2014, but there could be a shift in composition of growth and the two major components of construction- infrastructure and real estate.
Yesterday spot iron ore slumped 2.4 per cent to $US145.20 a tonne.
Barclays analyst Sijin Cheng said while China’s new leadership had identified urbanization as a top priority for China in coming years, it was “not budgeting for a commensurate boom” in infrastructure.
“In fact, total spending on affordable housing is set to decline from 2012 highs as the government scales back construction targets. Certain transport projects, such as railways, will see robust growth, but moderation sets the tone overall,” she said.
The broader All Ordinaries index was 42.8 points, or 0.84 per cent, higher at 5,130.9.On the ASX 24, the March share price index futures contract was up 41 points at 5,120 with 29,002 contracts traded.
CMC Markets senior trader Tim Waterer said share markets in Australia and elsewhere in the Asian region “revelled” after the historic session on Wall Street, where the Dow posted an all-time high.
"Traders on the Australian market did not need a second invitation to join in on the proceedings, with the ASX200 surging through 5100 with aplomb,” Mr Waterer said in a research note.
The local rally was mirrored around Asia, with markets in Shanghai, Hong Kong and Tokyo also higher in afternoon trade.
In Australia, the big retail banks, energy stocks and the consumer discretionary sector were among the better performers on a day of broad-based gains.
ANZ ended up 36 cents at $29.23, Commonwealth Bank climbed 63 cents to $69.31 and National Australia Bank was 24 cents higher at $30.83 and Westpac advanced 41 cents to $31.66.
Energy stocks were the best-performing sector on the market, rising 1.42 per cent according to IRESS data.
In percentage terms, Woodside posted the largest gain among stocks in the heavyweight S&P/ASX20, climbing 1.42 per cent, or 52 cents, to $37.15.
"It was a well-rounded performance from the market today with all the big name blue chips having solid outings,” Mr Waterer said.
"With the latest GDP data coming and going without incident, traders were given no reason to pull the reins."
Other stocks that posted large gains today included JB Hi-Fi, which lead all consumer discretionary stocks after rallying four per cent, or 54 cents, to $13.98.National turnover was 1.7 billion securities worth $5.3 billion.
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