Housekeeping takes stocks to year high
The benchmark S&P/ASX 200 Index added 16.3 points to 4634.1 while the broader All Ordinaries rose 13.4 points to 4646.6.
Most economists welcomed news that Treasurer Wayne Swan had admitted that a federal budget surplus was no longer achievable.
"This announcement should not surprise any rational-thinking analyst, merely confirming that this increasingly political commitment was not prudent during these uncertain economic times," TD Securities' head of Asia Pacific research, Annette Beacher, said.
Currency strategists said the dollar should not suffer sustained losses as a result.
"While overall it is a bigger political than economic story, a somewhat less-contractionary fiscal stance should not be a headwind for the dollar," Westpac strategist Sean Callow said.
The local market shrugged off a weak lead from Wall Street on Thursday after some cracks appeared in the US fiscal cliff negotiations, but the dollar weakened slightly to US104.75¢, from US104.84¢ earlier. The currency has fallen nearly 1 per cent this week.
Meanwhile, the Bank of Japan eased monetary policy by expanding its asset-buying and lending program, topping it up by ¥10 trillion to ¥101 trillion by a unanimous vote, expanding stimulus for the third time in the past four months.
The move was widely expected in response to intensifying pressure from incoming premier Shinzo Abe to deliver bolder steps to beat deflation.
Market watchers said much of the recent rise in the ASX 200 - nearly 7 per cent since its recent low on November 16 - could be attributed to fund managers buying up stocks before the end of the year.
"A lot of fund managers have been overweight in cash heading into year's end . . . [even though] we've had positive returns on the market for the last seven months," David Liu, head of research at ATI Asset Management, said. "So the people that were waiting for a dip, and waiting to buy the dip leading into the end of the year, haven't been able to do that . . . so a lot of people are having to utilise their cash."
Financial stocks led the day's gains, with all the big banks finishing higher.
ANZ closed 16¢ higher at $24.80, Commonwealth Bank was 18¢ stronger at $61.51, Westpac added 17¢ to $25.97 and National Australia Bank finished 8¢ higher at $24.88.
In contrast, big resource stocks finished lower, with Rio Tinto down 41¢ to $65.30, BHP Billiton shed 2¢, at $37.04, and Fortescue Metals slipped 16¢ to $4.50. With AAP
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The market hit a year high largely because fund managers were doing end-of-year housekeeping—buying stocks before year end—combined with a boost from the Bank of Japan expanding its asset‑buying and lending program. Positive reaction to Treasurer Wayne Swan admitting a budget surplus was no longer achievable also featured in commentary.
The benchmark S&P/ASX 200 added 16.3 points to close at 4,634.1, while the broader All Ordinaries rose 13.4 points to finish at 4,646.6.
Market watchers said much of the near‑7% rise in the ASX 200 since its recent low on November 16 was driven by fund managers who were overweight in cash and forced to deploy that cash before year‑end. For investors, that means part of the rally reflected portfolio rebalancing rather than only fundamental news.
The Bank of Japan expanded its asset‑buying and lending program by ¥10 trillion to ¥101 trillion—the third stimulus move in four months—to tackle deflationary pressure. That easing was seen as market‑supportive and contributed to positive sentiment in equity markets.
Financial stocks led the day. ANZ closed 16¢ higher at $24.80, Commonwealth Bank was 18¢ stronger at $61.51, Westpac added 17¢ to $25.97, and National Australia Bank finished 8¢ higher at $24.88.
While financials outperformed, big resource stocks slipped: Rio Tinto fell 41¢ to $65.30, BHP Billiton shed 2¢ to $37.04, and Fortescue Metals eased 16¢ to $4.50. The article contrasts resource sector weakness with strength in the banks on that day.
The Australian dollar weakened slightly to about US104.75¢ from US104.84¢ earlier and had fallen nearly 1% over the week. Strategists noted the fiscal news was more political than economic and a less‑contractionary fiscal stance shouldn’t be a sustained headwind for the dollar.
Treasurer Wayne Swan admitted a federal budget surplus was no longer achievable. TD Securities’ Annette Beacher said this should not surprise analysts and framed the previous commitment as imprudent in uncertain times. Westpac strategist Sean Callow added that a somewhat less‑contractionary fiscal stance is unlikely to hurt the dollar materially.
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