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Market's giant stride

AUSTRALIAN shares gained about $45 billion yesterday as the market took its biggest leap in almost three years on renewed optimism that a solution is near for the euro zone debt crisis.

AUSTRALIAN shares gained about $45 billion yesterday as the market took its biggest leap in almost three years on renewed optimism that a solution is near for the euro zone debt crisis.

Expectations that the US Federal Reserve would pour more stimulus into the ailing US economy also bolstered the market.

And the dollar held its ground after days of dramatic falls against the greenback.

The benchmark S&P/ASX 200 Index rose 143.4 points, or 3.65 per cent, to 4069.9. It was the biggest rise since December 8, 2008.

Investors were cheered by news that Germany would support efforts to recapitalise European banks through the European Financial Stability Facility.

At the same time, US Fed chairman Ben Bernanke told Congress the Fed was "prepared to take further action" to prop up the ailing US economy, in a statement interpreted to mean more stimulus.

Intersuisse director of equities Andrew Sekely said the local market had taken its lead from positive sentiment about the euro-zone debt crisis on Wall Street overnight, and went on to do better than the US market.

"It's a follow-through [from] two good days in the US and the market will soon be oversold," Mr Sekely said. "Investors are hoping that that strength we saw in the US and the measures that hopefully will be taken [in Europe] will continue to drive the market higher over there."

But he did not expect the market to maintain a rise of such proportions today.

Hugh Giddy, senior portfolio manager at Investors Mutual, said there was hope that the market had bottomed.

"I would expect that between now and Christmas the market is going to rise, because it normally does," he said.

But the timing of a traditional year-end rally, especially after such volatile trading on markets, remained unclear, he said.

The large number of shorted-selling positions on stocks had created an environment for sharp rebounds, Mr Giddy said.

Karara Capital investment manager Rohan Walsh said: "The market does look very cheap on a range of factors. It's a bit like an elastic band pulled tight really good value but heightened uncertainty."

Global markets have struggled since the beginning of August when fears about the national debts of the US rattled the nerves of investors already fretting about Europe's precarious fiscal situation.

Since then, sentiment has lurched between worries of a global recession and hopes for a resolution to the debt and slow growth plaguing the advanced economies.

"It's an elastic band and you see the two ends of the band pulling on each other on a day-to-day basis," Mr Walsh said. "That's why you see the volatility in the market."

Even before yesterday's session ended, euro-zone member Malta had postponed voting on the European Financial Stability Facility fund because of procedural objections by members of its parliament.

On the market, gains were felt across the board, with all sectors closing higher and only seven stocks on the S&P/ASX 200 Index including Foster's Group, which dropped 2? to $5.27 falling.

Materials, which were among sectors hardest hit by market declines in recent weeks, ended the day the strongest, rising 4.3 per cent.

But Mr Sekely said they were still a long way from recovering all the recent heavy losses on the back of weak commodity prices, particularly over the past fortnight.

The materials sector also benefited from a rally on overseas metal markets on Wednesday, with copper rising in overnight trade for the first time in six sessions, supported by a weaker US dollar.

Among the miners, BHP Billiton advanced 3.3 per cent, or $1.17, to $36.30, while Rio Tinto gained 4.9 per cent, or $2.98, to $63.28.

Atlas Iron climbed 20?, or 7.1 per cent, to $3, while Fortescue Metals gained 30?, or 7.1 per cent, to $4.55.

There was also solid support for financials, with the big retail banks gaining more than 4 per cent.

National Australia Bank was the strongest stock on the ASX 20, soaring 5 per cent, or $1.09, to $22.87.

Energy stocks also finished 4.1 per cent firmer after crude oil prices rallied on Wednesday after a significant, unexpected, drop in US oil stockpiles.

Woodside Petroleum ended 4.7 per cent, or $1.54 higher, at $34.34, while Santos closed 24?, or 2.1 per cent, stronger at $11.60.

Uranium miner Paladin Energy was the best-performing stock on the S&P/ASX 100 Index, soaring 16.2 per cent, or 19?, to $1.36.

The worst performer on the same index was Treasury Wine Estates, which fell 2? to $3.88.

The price of gold closed at $US1646.3, up $US22.55 from Wednesday's close.

The dollar rose more than a cent to close at US96.57? after being pounded recently by the same global growth worries that knocked 12 per cent off the S&P/ASX 200 Index in the three months to September.


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