AUSTRALIA'S sharemarket barrelled past the psychologically important 5000-point barrier on Wednesday to close at its highest level in more than 4 years.
Buoyed by Commonwealth Bank's strong half-year results, the benchmark S&P/ASX 200 Index jumped 1 per cent higher to close at 5003.7.
The last time the bourse was this high was in September 2008, and it was also the last time it had closed over 5000 since April 2010.
The rally, which has buoyed investor hopes of a return of a bull market, is a substantial turnaround from a low of 3145.5 points, hit in the depths of the global financial crisis.
The strong rally on Wednesday had much to do with Commonwealth Bank's record half-year profit of $3.78 billion, which beat market expectations and took the bank's market capitalisation to $108 billion. It helped shares in the country's biggest bank rally and the rest of the financial sector followed.
The local market has surged 25 per cent since June last year, encouraging sharemarket bulls to predict that investors could continue to see further gains.
But David Cassidy, at UBS, said it was a sign that things had calmed down in Europe and the US, and that Chinese growth had stabilised.
"The rally of the last six months has taken us up to the fair value area now, [but] to move beyond that you'd actually have to see growth accelerate, both globally and to some extent domestically," he said.
"You're starting to see some of the business and consumer confidence indicators pick up, even though I think the reality is that the domestic and global economies are still a bit on the sluggish side."
But analysts said investors appeared more upbeat this time, given global economic conditions were much calmer, so the market was benefiting from a much more positive earnings outlook.
Deutsche Bank equities strategist Tim Baker said the rally has been driven by an expectation of the health of the global economy finally improving.
"Interest rates are on the way down, China's had the leadership transition, the US has delayed the debt ceiling, Europe and the ECB's promise to do whatever it takes. So the accumulation of those events has got people a bit more upbeat on the earnings outlook," Mr Baker said.
Some traders expect the market to move higher over the next six months. "It's a good opportunity with an election and a weaker Aussie dollar later in the year to break through it," RBS Morgans senior trader Luke McElwaine said.
"It wouldn't surprise me, with a weaker Australian dollar, if we really start to motor to the mid-5000s and make up some of that lost ground when you compare us to the US market."
It is the third time that the S&P/ASX 200 has flirted with the 5000-point level since the market bottomed in early 2009. The first time, in April 2010, the market closed at 5001.9 points but quickly fell away as global economic conditions squeezed life from the rally.
At the time, the Reserve Bank was near the end of a 1.50 percentage point rate increase cycle, the Iceland volcanic ash cloud was wreaking havoc with the global airline industry, and BP's Deepwater Horizon offshore drilling platform exploded off the coast of Louisiana.
The second time, in April 2011, the market closed at 4971.2 points then fell away again. At the time, S&P had lowered its US sovereign debt rating to negative, fears were increasing of a Greek restructure, and the world was reeling from the Japanese tsunami and nuclear crisis.