Banks lead charge into positive territory
In the biggest one-day jump since January last year, the benchmark S&P/ASX 200 Index rose 96 points, or 2 per cent, to 4791.8 on Friday, while the broader All Ords added 90.6 points, or 1.9 per cent, to 4775.5.
For the week, the ASX 200 finished 0.7 per cent higher, ending a four-week run of losses.
Before Friday, the index was down 1.3 per cent and was close to wiping out all its gains for the year.
Speculation that the US Federal Reserve will taper its quantitative easing program was offset by stronger than expected US economic data. Strong retail sales numbers and jobless claims were enough to encourage traders that the world's largest economy was on the road to recovery.
Wall Street jumped on the signs of resilience, snapping a three-day losing streak that flowed through international markets.
This is at odds with recent trends that have seen investors react negatively to positive US economic data, who have taken it as a sign that the US Fed might stop printing money.
Across the Asia-Pacific region, Japan's Nikkei pushed 1.9 per cent higher, while Chinese markets bounced back from six-month lows on Thursday.
Banks, which started gathering momentum earlier in the week while the rest of the ASX was still suffering losses, led the charge into positive territory. For the week, Westpac rose 4.9 per cent to $28.94, ANZ pushed up 4.2 per cent to $27.82, NAB was 3.6 per cent higher at $29.38 and Commonwealth Bank added 3.2 per cent to $67.10.
"Generally this year, the banks have led the way. Once the banks start moving up, it does drag the rest of the index up as a lot of safer money comes back into the market," Ord Minnett senior investment adviser Tony Paterno said.
While mining stocks rose sharply on Friday, their losses earlier in the week offset much of the gains. BHP and Fortescue both finished about half a per cent down, but Rio Tinto pushed 1.5 per cent higher.
"The market is sending a lot of mixed signals. It's not being rational at the moment, it's a bit like a casino," Mr Paterno said.
Next week's US Fed meeting will be crucial for investor confidence. Volatility is likely to continue until chairman Ben Bernanke makes clear the central bank's intentions with regard to its monthly $US85 billion bond-buying QE scheme.
The Australian dollar continued its wild ride this week, trading as low as US94.27¢ early in the week and as high as US96.64¢ on Thursday night in the US. In late trade on Friday, the dollar was fetching US95.90¢, ¥91.2, 71.87 euro cents and 61.08 British pence.
ANZ currency strategist Andrew Salter said the fall in dollar was "just collateral damage", caught up in a volatile market place.
Frequently Asked Questions about this Article…
A late-week surge on world markets pulled Australian shares higher, with banking stocks leading the charge. Stronger-than-expected US economic data (retail sales and jobless claims) encouraged traders that the US economy was recovering, which helped lift global markets and snapped Wall Street’s losing streak — momentum that flowed into the ASX and pushed banks up.
In the biggest one-day jump since January last year, the S&P/ASX 200 rose 96 points, or 2%, to 4,791.8, while the broader All Ordinaries added 90.6 points, or 1.9%, to 4,775.5.
Banks led the weekly gains: Westpac rose 4.9% to $28.94, ANZ gained 4.2% to $27.82, NAB was 3.6% higher at $29.38, and Commonwealth Bank added 3.2% to $67.10.
The article notes that banks have tended to lead the market and that when banks move up they can drag the index higher as safer money returns. However, it also warns the market is sending mixed signals and can be volatile — likened to a casino — so investors should be aware that bank-led rallies can coincide with broader uncertainty and short-term swings.
Mining stocks rose sharply on Friday, but earlier losses during the week offset much of those gains. BHP and Fortescue finished about half a percent down for the week, while Rio Tinto pushed 1.5% higher.
Stronger US retail sales and jobless claims boosted confidence that the US economy was on the road to recovery, which helped global markets. At the same time, there was speculation the US Federal Reserve might taper its quantitative easing program — historically a source of volatility — so the combination of strong data and taper concerns created mixed investor reactions.
The Australian dollar had a wild ride: it traded as low as US94.27¢ early in the week and as high as US96.64¢ on Thursday night (US time). In late trade on Friday the dollar was fetching US95.90¢, ¢91.2, 71.87 euro cents and 61.08 British pence, reflecting substantial intraday and week-to-week swings.
Next week’s US Federal Reserve meeting is highlighted as crucial for investor confidence. Volatility is likely to continue until Fed chairman Ben Bernanke makes clear the central bank’s intentions regarding its monthly $US85 billion bond‑buying (QE) program.
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