THE sharemarket rallied yesterday after a string of corporate deals, led by a $2.25 billion deal between Whitehaven Coal and Aston Resources, boosted energy and mining stocks.
Investors also welcomed news that Europe's leaders had agreed on the weekend to rein in spending in the troubled euro zone.
The S&P/ASX 200 Index rose 49.8 points, or 1.18 per cent, to 4252.8 winning back two-thirds of Friday's 77.7-point fall. The benchmark has now gained 5.4 per cent in value in the past two weeks.
In the biggest announcement of the day, Whitehaven Coal said it would acquire Aston Resources for $2.25 billion, making it the biggest top-listed coal company in Australia.
The billionaire Nathan Tinkler, Aston's biggest shareholder, gave the deal the go-ahead, agreeing to sell his 32 per cent stake. Aston shares rose 14? to $9.90, or 1.4 per cent, but Whitehaven dropped 8?, or 1.4 per cent, to $5.74.
Industrial and retail congolmerate Wesfarmers dropped 58?, or 1.8 per cent, to $30.90 after amendments to its contracts with BlueScope Steel left it facing a $190 million write-down in its Coregas business.
The big banks performed strongly, led by Commonwealth Bank, which rose 2.03 per cent to $49.83, and NAB, up 1.42 per cent to $24.36.
The market opened strongly and remained buoyant for the whole session, despite official figures for October's trade surplus coming in below economists' expectations.
The $1.6 billion surplus was down $654 million on September, with exports flat and imports rising sharply. Exports are now up 11.6 per cent on the year while imports have risen 17.2 per cent.
Other figures from the Bureau of Statistics showed home-loan approvals rose in October for the seventh straight month, before the Reserve Bank's two 25-basis-point rate cuts.
But with loans for the construction of homes falling by 1.8 per cent the fourth fall in five months economists said it was bad news for builders.
"Presumably home building will get a lift from the recent rate cut," Commonwealth Bank chief economist Craig James said in a note.
"But the current data is hardly positive for the home building industry," he said. "Population is rising but we aren't adding to the housing stock, suggesting that established home prices will soon flatten and then start edging higher again."
The dollar put on half a US cent to finish the day on $US1.0169.