THE sharemarket roared back to life yesterday, surging by $24 billion and closing at a two-month high as investors shrugged off fears about the global economy and piled into beaten-down resource stocks.
The dollar had a shot in the arm too, reaching a record high against the depressed euro, and soaring to US104.1? against the US dollar on speculation that US Federal Reserve chairman Ben Bernanke would resort to a third round of money printing to rekindle growth in the world's biggest economy.
The Aussie also hit a record high of 84.6 euro cents yesterday on market talk that Germany's Bundesbank was planning to add assets denominated in Australian dollars to its reserves from next quarter.
The benchmark S&P/ASX 200 share index recorded its biggest rise since January, closing 2 per cent higher or 83.1 points, at 4206.7. The broader All Ordinaries Index jumped 80 points, or 1.9 per cent, to 4236.4, as market heavyweights Telstra reached a 3-year high, Commonwealth Bank hit a two-year high and conglomerate Wesfarmers made its highest close for a year.
Resource stocks dominated the list of biggest improvers on the ASX after a rise in oil prices. On Wednesday a handful of resource stocks recorded multi-year share price lows.
Money poured into oil and gas giants Woodside Petroleum and Santos, which jumped 7.5 per cent and 5.8 per cent respectively, after solid result briefings. Uranium miner Paladin soared nearly 10 per cent on speculation it might attract a takeover offer.
With commodity prices still under pressure, there was no obvious inspiration for the 3 per cent and 4.7 per cent gains recorded respectively by BHP Billiton and iron ore miner Fortescue, suggesting investors believed the stocks were oversold at Wednesday's lows.
Rio Tinto improved by a comparatively modest 1 per cent.
The head of Australasian research sales at UBS, George Kanaan, said the market surge was driven by yield-hungry investors.
"[It's being done by] a lot of income funds, and also a lot of Japanese money, which is not uncommon but it's been more common recently," he told BusinessDay.
David Liu, head of research at ATI Asset Management, said markets were rallying on expectations of further stimulus from the US and China. "And leading into that you're finding that the people who had heavily shorted a lot of these stocks are starting to cover their shorts a little bit."
On Wednesday night, Mr Bernanke, testifying for a second day to US Congress, reiterated that the US economy was slowing but said the Fed would use stimulus measures, if warranted, to boost growth.
Energy, staples and materials were yesterday's top three sectors. Discretionary stocks, healthcare and information technology led the losers.
The gains came despite a National Australia Bank survey showing Australian business confidence and conditions dived in the June quarter, as the European debt crisis cancelled gains from interest rate cuts by the Reserve Bank.
The survey, of more than 900 businesses across the non-farm sector, revealed a "sizeable" though narrowing gap between the best-performing industries mining, transport and utilities, recreation and personal services and finance, business and property and the worst performers retail, manufacturing, construction and wholesale.
It also found that Australia's multi-speed economy "remains fundamentally intact", with businesses in resource-rich Western Australia recording the most positive results and conditions weakest in Victoria and Queensland.
Meanwhile, analysts remain upbeat about prospects for the dollar, tipping it will remain around the US104? mark for the near term.
"The eurozone is in recession and it's unlikely to bounce back any time soon in terms of fundamentals, so that difference is continuing to drive the Aussie higher against the euro," said Commonwealth Bank currency economist Peter Dragicevich.