Record highs on US markets propelled the ASX firmly into the green, while fresh comments on interest rates have settled nerves.
The Australian sharemarket was propelled higher by a positive lead from Wall Street, but managed to outperform it, while follow up comments to yesterday’s rates decision appear to have “settled nerves”.
The benchmark S&P/ASX200 index rallied 0.93 per cent to 7392.7, while the All Ordinaries Index strengthened 0.87 per cent to 7713.
CommSec analyst Steven Daghlian said the local bourse outperformed US markets, which hit fresh record highs overnight, with the Dow Jones Industrial Average closing above 36,000 for the first time, up 0.4 per cent.
After the Reserve Bank of Australia held its monthly board meeting on Tuesday, keeping the cash rate at a historic-low 0.1 per cent, governor Philip Lowe said he strongly disagreed with current market pricing for hikes in 2022.
“He basically said hikes next year, while not impossible, are extremely unlikely,” Mr Daghlian said.
“But he did say it’s possible for rates to rise in 2023, so it seems to have settled nerves, to an extent.”
AMP Capital chief economist Shane Oliver remains convinced both Australian and US central banks will “start raising rates later next year”.
OMG chief executive Ivan Tchourilov noted reactions to the RBA meeting had been mixed, with the central bank “refusing to match the hawkish outlook of other major financial institutions”, and credited the ASX rise to the upbeat US lead.
“There weren’t a lot of losers today – even iron ore miners were in the green, despite iron ore prices crashing overnight,” Mr Tchourilov said.
Mr Daghlian said the iron ore price had fallen for five straight days, back below $US100 per tonne, and had tumbled about 20 per cent in a little over a week.
“This is on some fresh restrictions on steel production in China in a bid to control pollution ahead of next year’s Beijing Olympics,” he said.
Rio Tinto lifted 1.17 per cent to $89.70, BHP added 1.07 per cent to $35.94 and Fortescue advanced 3.08 per cent to $14.38.
A particularly strong performer was lithium miner Orocobre Ltd, which surged 6.7 per cent to $9.70.
The banks gained ground after three straight trading days of losses.
Commonwealth Bank revealed it will become Australia’s first bank to offer customers the ability to buy, sell and hold cryptocurrency assets, including Bitcoin and Ethereum, directly through its CommBank app.
The pilot will start in coming weeks and CBA intends to progressively rollout more features next year.
CBA put on 1.17 per cent to $107, National Australia Bank rose 1.35 per cent to $28.58, Westpac inched two cents higher to $23.15 and ANZ gained 2.26 per cent to $28.47.
Investors applauded AMP announcing it had completed its exit from life insurance after more than 170 years in the business, selling its 19.13 per cent interest in Resolution Life Australasia for $524m.
The group sold the majority of the business last year for $3bn and says the divestment of the remaining stake provides balance sheet flexibility ahead of the planned demerger of its private markets division, which holds real estate and infrastructure investments.
“It’s a welcome capital injection for the wealth manager, if their new fancy building in Sydney CBD is anything to go by,” Mr Tchourilov said.
“AMP’s streamlining plans hit a hitch when the company was rinsed at the 2019 Hayne Royal Commission – it seems they are now starting to find their feet again.
“They’re focusing on banking and wealth management and divesting from the rest, usually maintaining a stake in the divested entity.”
AMP shares leapt 9.3 per cent to $1.17.
Telstra renewed its contract with the Department of Defence, clinching a five-year deal worth more than $1bn, but its shares didn’t budge from $3.90.
Packing giant Amcor firmed 0.75 per cent to $16.11 after delivering a solid first quarter result and reaffirming its full-year outlook, despite sales in some parts of the business being hit by raw material shortages.
Insurance Australia Group continued to backtrack, losing 1.11 per cent to $4.45 a day after downgrading its full-year guidance due to higher estimates for hail and severe storm damage claims, which sent its shares tumbling more than 7 per cent on Tuesday.
“Four brokers have reduced their expectations for its shares over the next 12 months,” Mr Daghlian said.
Domino’s Pizza held its annual general meeting, announcing its commitment to net zero emissions by 2050, flagging its plan to operate more than 6650 stores by 2030 – up from 3169 currently – and also warning it expects to be faced with higher food and energy costs next year.
Domino’s shares eased 0.13 per cent to $142.30.
In economic news, building approvals fell by 4.3 per cent in September, but were up 12.8 per cent on a year ago.
Approvals to build detached houses dropped 16.1 per cent in September – which CommSec senior economist Ryan Felsman said was the biggest monthly decline in 21 years – but higher-density apartment approvals lifted 17.4 per cent.
“Building construction is expected to remain elevated over the next 12 months due to strong homebuyer demand,” Mr Felsman said.
“Builders and their contractors are under pressure to deliver projects on-time and on-budget as they work through a huge pipeline of residential, commercial and infrastructure-related construction work.
“Already construction companies are experiencing skilled trades labour shortages and rising building materials costs due to supply-chain disruptions.”
The Aussie dollar was buying 74.32 US cents, 54.53 British pence and 64.15 Euro cents in afternoon trade.
Originally published as Australian sharemarket surges into the green, notching up gains across the board