Falling metals prices, rising global borrowing costs and weak Chinese markets were again ignored today as investors poured cash into the Australian sharemarket to extend the belated Father Christmas rally.
Wall Street finished marginally lower last night but the S&P/ASX 200 index jumped another 63 points, or 1.21 per cent, to 5265.2 points as fund managers slashed cash holdings with just six-trading sessions left for the year.
Hopes for a US-led global recovery next year swept aside the dour domestic growth outlook delivered by Treasurer Joe Hockey on Tuesday, with Australian dollar hedge stocks back in strong demand.
However, the dollar bounced US0.4¢ to US88.70¢ as currency strategists remained divided over the outlook for the US dollar following the US Federal Reserve’s announcement that it would taper its bond purchasing program by $US10 billion to $US75 billion a month while lowering the unemployment threshold to 6.5 per cent at which interest rates would start to rise.
“Similar-sized reductions are likely to take place at each upcoming meeting assuming the economy continues to evolve in line with the Fed’s base-line forecast,” ANZ economists said. “This should continue to put downward pressure on the AUD over the coming months.”
Global benchmark US 10-year yields climbed 5 points to 2.94 per cent, just shy of their two-year high at 3 per cent, while Australian 10-years rose 1.5 points to 4.286 per cent.
US equity market gains were tempered by data that reflected the delayed impact of the surge in US bond rates since the Fed first hinted at tapering in May.
Mortgage applications fell 5.5 per cent last week, US existing house sales fell 4.3 per cent, the third monthly drop and first annual drop in more than two years, weekly jobless claims rose and the Philadelphia Fed activity index rose but fell short of forecasts for a stronger improvement.
The Shanghai composite index was off 0.6 per cent at the close of the ASX as Chinese interbank repo borrowing rates remained elevated near six-month highs despite the People’s Bank of China extending its hours of operation last night and injecting emergency cash into the financial system.
However, the central bank lending was to “qualified” institutions, leaving the shadow banking system straining for liquidity.
In Tokyo the Nikkei index was down 0.5 per cent after the Bank of Japan held back from increasing its stimulus program, maintaining the economy was recovering with moderate growth.
Gold tumbled 3.2 per cent through two key-support levels last night to a low of $US1189 an ounce, before bouncing to $US1196/oz, while copper fell 0.9 per cent to $US7190 a tonne. On Thursday spot iron ore lost 0.4 per cent to $US132 a tonne.
Telstra hits a near nine-year high and financial stocks drove the gains as investors partially reversed a big sell-off in the banks since November.
"That’s just removed a lot of uncertainty from the markets and we’re just ... basically seeing a relief rally off that,” Australian Stock Report senior equity analyst Benny Sada said.
"The financials had been leading the declines within our market over the last month so naturally they would be the ones leading the rally."
ANZ was the strongest of the big four, in percentage terms, gaining 65 cents, or 2.1 per cent, to $31.78.
Commonwealth Bank was $1.08 higher at $75.93, Westpac gained 20 cents at $31.57 and National Australia Bank put on 23 cents to $34.26.
Telstra hit its highest closing price since February 2005 after announcing it would sell its stake in Hong Kong mobile business CSL for around $2 billion.
The shares gained nine cents, or 1.76 per cent, to $5.20.
"Telstra’s been the other key reason behind today’s gains,” Mr Sada said.
In the resources sector, BHP Billiton added 43 cents to $37.23 and Rio Tinto added 21 cents to $66.74.
Whitehaven Coal added 5.5 cents to $1.86 after the Federal Court ruled the federal Labor government had not erred in approving the controversial Maules Creek mine in NSW.
Energy stocks also rose as a cold snap in the US sent gas prices soaring.
Woodside Petroleum added 64 cents to $38.59, Santos gained 33 cents to $14.45 and Oil Search was 11 cents higher at $8.15.
The broader All Ordinaries index was up 59.5 points, or 1.14 per cent, at 5261.5 points.
The March share price index futures contract was 54 points higher at 5237 points, with 26,077 contracts traded.
National turnover was 2.2 billion securities worth $8.4 billion.