Demand for defensive stocks helped the Australian sharemarket shrug off losses on Wall Street where a raft of European and US sanctions on Russia triggered a scramble for safe-haven bonds.
The S&P/ASX 200 index got off to a slow start but spiked higher mid-morning as domestic bond yields fell and traders positioned for a “dovish” yield outlook from the US Federal Reserve monetary policy statement tonight. The index climbed 34.5 points, or 0.62 per cent, to a fresh six-year high of 5622.9 points.
Last night US stocks reversed early gains to close 0.5 per cent down, while US 10-years dropped 3 points to 2.45 per cent and German Bunds tumbled 3 points to a record low of 1.12 per cent on fears of trade and eurozone growth repercussions from sanctions on Russia.
“The Russia sanctions are likely to remain more of a regional issue and only a modest restraint on global risk appetite,” Royal Bank of Scotland currency strategist Greg Gibbs said.
“The still-easy global financial conditions are likely to keep investors focused on a search for yield. This appears to have helped boost Asia regional asset markets on a rotation out of Europe.”
He said the bulk of the sanctions were in the financial sector.
“They are not a total ban on business but are intended to block medium- and long-term funding to Russian companies and banks,” he said.
The Shanghai composite index was marginally higher at the close of the ASX as energy stocks surged and property stocks slumped following a Communist Party announcement of a high level corruption probe.
There were also leaks that authorities would create five asset management companies, or “bad banks to buy bank non-performing loans and repackage them as asset backed securities.
In Tokyo the Nikkei index was up 0.2 per cent despite Japanese industrial production slumping 3.3 per cent in June, the biggest decline since the Tsunami in March 2011.
The Australian dollar slipped US0.2¢ to US93.80¢ while government 10-years fell 4.8 points to 3.422 per cent ahead of US June-quarter GDP data tonight.
Spot iron ore rose one per cent to $US95.30 a tonne yesterday while Dalian iron ore futures were off one per cent today.
Copper lost 0.8 per cent to $US7060 a tonne while gold fell $US10 to $US1299 an ounce.
CMC chief market strategist Michael McCarthy said many investors had missed out on stocks at cheaper levels during July.
"Market leadership has changed again, volatility is on the rise and yet we’ve hit a post-GFC high,” Mr McCarthy said.
"The constantly changing market leadership is reflecting buyers who have been waiting for a pullback in the market and not getting it, having to scramble in."
He said investors were buying into sectors which recently had not performed.
The local share market is up around four per cent for the month of July.
The ASX 200 last reached 5600 points in June 2008.
Resource stocks were mixed, with Rio Tinto adding 32 cents to $66.07, BHP lost six cents to $39.00 while Fortescue Metals added 10 cents to $4.96, according to preliminary figures.
The big four banks had begun the day under pressure but finished stronger, with ANZ putting on 17 cents to $33.86, NAB adding seven cents to $35.18, Westpac nine cents higher at $34.36 and Commonwealth Bank enjoying a 78-cent gain to $83.13.
Tap Oil shares received a 7.3 per cent lift as the company’s flagship Manora project nears production.
Mortgage insurer Genworth has risen 32 cents to $3.59 after flagging a full year profit of up to $250 million.
However, fashion retailer Noni B dropped four cents, or 8.5 per cent, to 43 cents after warning weak market conditions means it will post a loss at the higher end of its previously advised $1.8 to $2.2 million spectrum.
The broader All Ordinaries index was up 34.5 points, or 0.62 per cent, at 5615.1.
The September share price index futures contract was 32 points higher at 5571, with 24,664 contracts traded.
National turnover was 1.6 billion shares worth $4 billion.