Market closes up 1 per cent
The Australian sharemarket finally gained some traction after firmer US economic data swept aside fears of the US Federal Reserve tapering its bond purchasing program.
Following a rally to a record high on Wall Street last night, the S&P/ASX 200 index rose 55.3 points, or 1.1 per cent, to 5116.8 points, with the major banks recouping losses from the introduction of a government deposit guarantee levy.
US stocks rallied after the ISM manufacturing index countered the drop in the Chicago PMI index on Wednesday and the weekly jobless claims also fell sharply, all of which raised hopes the world's biggest economy was gaining some growth momentum.
However, the US dollar rallied against most major currencies and gold, as US benchmark 10-year yields jumped 10 points to 2.71 per cent on expectations the firmer data paved the way for the Fed to begin scaling back quantitative easing after its September 19 meeting.
The Australian dollar tumbled to a three-year low of US88.90 cents as markets priced in a near certainty of a rate cut on Tuesday but government 10-year yields jumped 11.1 points to 3.778 per cent.
The slack demand conditions in the domestic economy was underlined by a drop in producer price inflation to just 0.1 per cent from 0.3 per cent for the quarter, and 1.2 per cent for the year.
In Tokyo the Nikkei index climbed 3.1 per cent as exporters rallied on the firmer US growth outlook.
The Shanghai composite index was up 0.3 per cent at the close of the ASX as growth doubts persisted.
Standard Life Investments senior international economist Jeremy Lawson wrote in a report that forecasts for Chinese growth are likely to be downgraded further over the next year.
He said while a genuine near-term hard landing was still a risk rather than a central scenario, the risks had increased and the widespread confidence that the central authorities "can effectively choose how quickly the economy will grow has been exaggerated".
At some point a "reset" might be necessary to put the economy on a more sustainable path, even if it meant a short period of very weak growth, he said.
Gold slumped $US30 to $US1287 an ounce, while copper pared its overnight 1.8 per cent, sliding 0.6 per cent to $US6957 a tonne. On Thursday spot iron ore slipped 0.1 per cent to $US129.70 a tonne.
The broader All Ordinaries index was up 51.6 points, or 1.02 per cent, at 5,098.7. On the ASX 24, the September share price index futures contract was 61 points higher at 5,068, with 20,807 contracts traded.
IG market strategist Evan Lucas said more positive job numbers in the US on Friday night, Australian time, could lead to an all-time record eleventh day of gains for Australia’s top 200 companies.
The S&P 500 broad stock index in the US is currently at an all-time high.
"We have been up five out of the last six weeks so it has been a very strong period even though we haven’t seen it because it’s been very gradual,” he told AAP.
The big miners performed strongly, with BHP Billiton gaining 58 cents to $35.75 and Rio Tinto added $1.37 to $59.31.Both have rallied of late, suggesting investors were confident they would deliver strong profits during the coming earnings season.
The big four banks all traded higher, with Westpac the standout gaining 59 cents, or 1.9 per cent, to $31.46.
Gold stocks lost nearly four per cent with investors losing confidence in the sector amid weak prices and high costs.
Goldminer Regis Resources was the worst performer among the top 100 stocks, down 5.1 per cent to $3.37.
National turnover was 1.9 billion securities worth $4.5 billion.
