Positive economic news generates bounce
The benchmark S&P/ASX 200 Index jumped 75.7 points (1.6 per cent) to 4731.7. The broader All Ordinaries rose 74.3 points (1.6 per cent) to 4707.8.
Overnight in the US, better than expected manufacturing data and stronger consumer confidence helped boost market sentiment on hopes the world's largest economy was recovering. As a result, the S&P500 finished 1 per cent higher, and the Dow Jones lifted 0.7 per cent.
This was counter to the recent trend that has seen markets fall on positive US economic data, under the guise that the Federal Reserve will stop its $US85 billion monthly bond-buying program, which has pumped up markets.
Investors seem to have come to terms with the fact that the Fed will soon begin to end quantitative easing in the belief the US economy can stand up on its own.
"In the short term, volatility is likely to remain high and risk assets could stay under pressure," said HSBC regional head of wealth management, Asia Pacific, Vineet Vohra.
"It is important for investors to remain focused on the fundamentals and, if need be, look through the short-term volatility."
Also helping to lift the local market, the People's Bank of China said late on Tuesday it would act as a last-resort lender for banks caught in a credit squeeze.
Credit Suisse analyst Damien Boey said investors were taking this as a sign China's central bank would inject stimulus into the economy.
Of the miners, Rio enjoyed the biggest lift, up 3.3 per cent to $51.90. BHP gained 2.6 per cent to $31.62 and iron ore miner Fortescue rose 2.4 per cent to $3.03.
All the big banks finished strongly, rising between 1.7 per cent and 1.9 per cent. Westpac was the biggest winner, closing at $28.24.
Goldminers were the only sector to finish lower, as the spot price continued its march south, falling a further 2.1 per cent to $US1250.51, its lowest since September 2010. It has plunged 25.4 per cent this year.
The dollar was trading higher. Late on Wednesday, it was trading at US92.80¢, up from US92.55¢ on Tuesday.
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The sharemarket bounced after positive US economic data (stronger manufacturing and consumer confidence) and signs that China’s credit crunch was easing. Together these lifted sentiment and drew investors back into risk assets.
The benchmark S&P/ASX 200 jumped 75.7 points (1.6%) to 4731.7, while the broader All Ordinaries rose 74.3 points (1.6%) to 4707.8.
Overnight the S&P 500 finished about 1% higher and the Dow Jones rose around 0.7%, helped by better-than-expected US manufacturing data and stronger consumer confidence, which boosted global market sentiment.
Recently positive US data has sometimes caused market falls because investors worry the Federal Reserve will wind back its US$85 billion monthly bond‑buying program. But this time investors appeared to accept that the Fed may begin to end quantitative easing as the US economy improves, reducing that immediate negative reaction.
HSBC’s Vineet Vohra warned short‑term volatility is likely to remain high and risk assets could stay under pressure. He advised investors to stay focused on fundamentals and, if necessary, look through short‑term volatility.
The People’s Bank of China said it would act as a last‑resort lender for banks caught in a credit squeeze. Credit Suisse analyst Damien Boey said investors took this as a sign China’s central bank could inject stimulus into the economy, which helped lift markets.
Miners led gains: Rio Tinto rose 3.3% to $51.90, BHP gained 2.6% to $31.62 and Fortescue added 2.4% to $3.03. All the big banks finished strongly, up between 1.7% and 1.9%, with Westpac the biggest banking winner, closing at $28.24.
Gold miners were the only sector to finish lower as the spot gold price fell 2.1% to US$1,250.51 — its lowest since September 2010 and down 25.4% for the year. The Australian dollar was trading a little higher, at about US92.80¢, up from US92.55¢ the previous day.
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