Fiscal cliff deal spurs flying start to 2013 on Australian sharemarket
The S&P/ASX 200 Index closed at 4705.9 points - a 19-month high - and recorded its biggest percentage gain in one day in five months.
"It's a relief rally that's taken shape with the fiscal cliff out of the way for the moment," BBY institutional dealer Anson Rosewall said. But he cautioned that trading volumes were unusually thin and open to exaggerated moves.
The dollar rose against the US dollar, fetching just under US105¢. An appetite for risk saw the yen fall broadly, helping lift the Australian dollar to as high as ¥91.535.
While the market reacted favourably to the deal, more political bickering in the US was expected over the debt ceiling, reintroducing uncertainty into the market, said Justin Fabo, the head of ANZ's Australian economics department.
"What we saw last time this happened is that it will possibly again create all this uncertainty," Mr Fabo said about the last debt ceiling fight in 2011.
"The main effect on Australia will be through confidence channels. We still think that these things get resolved, it's just that that tends not to happen straight away.
"In the meantime, the uncertainty tends to have an adverse effect on confidence, not just in the US but also in Australia."
Mr Fabo said he expected any negative repercussions on Australia to be short-lived, with domestic issues still taking precedence in their impact on the local economy.
He said that recent economic data, such as the surprise fall in house prices nationally for December, which was released on Wednesday, and the fall in private sector credit levels, indicated that the Reserve Bank was still likely to cut interest rates again when it meets in early February.
"There's still not a lot of evidence that the interest rate-sensitive parts of the economy are picking up strongly enough. So our view is that there are further cuts to rates to come over the course of this year," he said.
Frequently Asked Questions about this Article…
The article says the Australian sharemarket rallied after the US Congress backed a deal to avert the 'fiscal cliff'. That relief rally pushed the S&P/ASX 200 up about 1.2% on the first trading day of 2013, closing at 4,705.9 points – a 19‑month high and the index's biggest one‑day percentage gain in five months.
According to the article, removing the immediate fiscal cliff risk sparked a relief rally in risk assets, directly contributing to the S&P/ASX 200's strong one‑day gain and its rise to a multi‑month high as investors became more willing to buy shares.
The article quotes BBY institutional dealer Anson Rosewall warning that trading volumes were unusually thin, which can exaggerate market moves. For everyday investors, that means short‑term price swings may not reflect underlying fundamentals and can be riskier to trade on.
Yes. The article cites Justin Fabo of ANZ saying more political bickering over the US debt ceiling could reintroduce uncertainty. He notes the main channel for impact on Australia is confidence — global headlines can dent investor and consumer sentiment here even if any fallout is likely to be short‑lived.
The article reports the Australian dollar rose against the US dollar to just under US105¢ and also strengthened after the yen fell, reaching about 91.535 against the yen. Currency moves reflect increased risk appetite and can affect returns for Australian investors in global assets, as well as exporters and importers.
Yes. Justin Fabo told the article that recent data — including a surprise fall in national house prices for December and a drop in private sector credit — suggested the RBA was still likely to cut interest rates again when it met in early February, and that further cuts could come during the year.
The article highlights two data points to watch: the unexpected national fall in house prices for December and a decline in private sector credit levels. Both can influence the RBA's policy decisions and overall investor confidence in the domestic economy.
The tone in the article is cautiously optimistic: while the fiscal cliff deal sparked a strong relief rally, commentators warned about thin trading volumes and the risk of renewed uncertainty from US politics. The article also points to domestic economic weakness that may prompt RBA easing, so investors are reminded to be mindful of short‑term volatility and broader economic signals.
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