Solid domestic data and easing emerging market jitters were the perfect invitation for bargain hunters to dive back into the Australian sharemarket today.
Shrugging off the softer lead from Wall Street last night the S&P/ASX 200 index climbed 61 points, or 1.2 per cent, to 5131.4 on below average volume after December retail sales met forecasts and the trade balance jumped into surplus.
Economists and investors took an upbeat view on the 0.5 per cent in retail sales which was read as a signal the delayed consumer response to the 225 points of rate cuts was finally taking effect.
The detailed breakdown, however, was not quite as clear as the inflation adjusted 0.9 per cent increase for the December-quarter missed forecasts and the monthly increase was heavily dominated by food sales, with most other sectors lagging.
“Broadly speaking, the Dec report shows the recovery in retail sales evident in August to November extending into December,” Westpac economist Matthew Hassan said.
“Importantly though it does not show an acceleration in spending momentum which remains solid rather than spectacular, particularly in volume terms.”
The Australian dollar jumped US0.7¢ to US89.70¢, but underscoring the positive impact from its weakness last year, a trade surplus of $468 million was notched up in December, well in excess of the forecast $200 million deficit, on record exports to China.
Australian government 10-year yields jumped 6.3 points on the firmer data and rise in US 10-years to 2.67 per cent.
Last night the US S&P 500 index lost 0.2 per cent after the solid private sector ADP payroll report raised the prospect of a strong non-farm payroll number tomorrow and another step down in US Federal Reserve stimulus.
Philadelphia Fed president Charles Plosser said he expected the economy to expand 3 percent in 2014 as the jobless rate fell to 6.2 percent by year-end, warranting a quicker tapering to bond purchases.
In Tokyo the Nikkei index was up 0.6 per cent at the close of the ASX while Chinese markets remained closed for public holidays.
Gold was unchanged at $1255 an ounce, while copper was set to end its worst losing streak in 18-years as it edged up 0.3 per cent to $US7070 a tonne.
Bell Direct equities analyst Julia Lee said one of the key reasons for the gains was a rise in the value of the Australian dollar.
“As the dollar moves up, that’s really what international investors want to see when they invest in Australia,” Ms Lee said.
“They tend to trade in the big stocks such as the big banks and BHP and Rio - that’s where we’re seeing a lot of the strength today.”
National Australia Bank gained 49 cents to $32.63, ANZ added 41 cents to $29.43, Commonwealth Bank put on 99 cents to $73.48 while Westpac was 52 cents higher at $30.83.
BHP gained 29 cents to $35.57 and Rio Tinto added $1.06 to $65.65.
The news that Australia’s trade surplus was $468 million in December, well above economists’ predictions of a deficit of $1.2 billion, prompted the Australian dollar to jump to almost 90 US cents.
One of the market’s biggest movers was Virgin Australia, despite saying it expects to post a $49 million pre-tax loss for the first half of the financial year.
Its shares gained 2.5 cents, or 7.9 per cent, to 34 cents, as the forecast was better than what some analysts had been expecting.
The broader All Ordinaries index was up 58.7 points, or 1.15 per cent, at 5147.4.
The March share price index futures contract was 58 points higher at 5076, with 27,848 contracts traded.
National turnover was 1.3 billion securities worth $4.1 billion.