Market extends Santa Claus rally
A bounce in oil prices and renewed search for yield dragged the Australian sharemarket sharply higher today and back into the black for the year.
Extending the bullish surge from last week, the S&P/ASX 200 index 103.3 climbed points, or 1.94 per cent, to 5442 with most sectors closing in the black as traders positioned for further gains into the year-end.
Another $23.2 billion of shareholder value was restored.
Brent crude oil jumped 5 per cent to $US62.25 a barrel as speculators wagered on a rebound to above $US70/bbl following losses of 50 per cent this year, before falling to $US40/bbl.
Goldman Sachs is forecasting a rebound to $US85 a barrel while Bloomberg reported that US Commodity Futures Trading Commission long bets increased by 34 per cent, the most since February.
The Australian dollar was little changed at US81.55¢ but government 10-year yields fell 9.8 points to 2.841 per cent as fears of global deflation continued to drive demand for safe haven government bonds.
Deflation fears were stoked by European Central Bank Vice President Vitor Constancio who said in a magazine interview he expected the euro zone inflation rate to turn negative in the coming months but it would be a temporary phenomenon and he did not see a risk of deflation.
The Shanghai composite index remained on a wild ride, twice rising and falling more than 1.5 per cent before settling 0.4 per cent up at the close of the ASX.
In Tokyo the Nikkei index was off per cent.
Spot iron ore bounced one per cent to $US69.20 a tonne on Friday while Dalian iron ore futures were off 0.4 per cent today.
Gold was little changed at $US1198 an ounce and copper climbed 1.6 per cent to $US6425 a tonne.
OptionsXpress market analyst Ben Le Brun said the higher price for oil was boosting the energy sector, and the rest of the market was still rising on the back of comments from the US Federal Reserve last week suggesting that it may raise interest rates only in the middle of 2015 and not sooner.
“The anticipation is there for investors and traders that this rally still has more to play out to the upside,” Mr Le Brun said.
“We’re seeing the two same sectors that have been the backbone of the recent gains again in the limelight, which is energy and materials.”
Consequently, energy giant Woodside Petroleum lifted 93 cents, or 2.46 per cent, to $38.70, and oil and gas producer Santos advanced 51 cents, or 6.38 per cent, to $8.50.
Global miner BHP Billiton added 86 cents, or 2.97 per cent, to $29.84, Rio Tinto rose $1.44, or 2.56 per cent, to $57.73, and Fortescue Metals gained 14 cents, or 5.49 per cent, to $2.69.
Among other stocks, Coles owner Wesfarmers was up 63 cents at $41.94.
Coles will pay $11.25 million in fines and costs after a court found the supermarket chain had engaged in illegal and unconscionable conduct in its dealings with suppliers.
Adventure clothing retailer Kathmandu plunged 57 cents, or 21.59 per cent, to $2.07 after it reported slow Christmas sales.
Fairfax Media firmed 1.5 cents to 84.5 cents after it announced it and Macquarie Radio Network had agreed to merge their radio businesses.
Macquarie Radio shares were three cents higher at $1.35.
APN News and Media was four cents richer at 78 cents after it announced it had acquired Perth radio station 96FM from Fairfax Media for $78 million.
Transfield Services backtracked 8.5 cents, or 4.75 per cent, to $1.705 as Spain’s Ferrovial Services ended talks on taking over the project manager.
The broader All Ordinaries index was up 101.4 points, or 1.91 per cent, at 5414.1 points.
The March share price index futures contract was 102 points higher at 5414 points, with 31,997 contracts traded.
National turnover was 1.7 billion securities worth $3.97 billion.
