Australian shares have risen to their highest close in more than four months, led by miners, as investors cheered another round of monetary stimulus by the US Federal Reserve.
For the week, the S&P/ASX200 rallied 64.2 points, up 1.5 per cent, to finish at 4390, while the All Ordinaries rose 61.5 points or 1.4 per cent, to 4410.2. On the day, the ASX200 rose 50.6 points, or 1.2 per cent, while the All Ords rose 50.4 points, also 1.2 per cent.
Yesterday the US Federal Reserve unveiled a third round of quantitative easing to the tune of $US40 billion a month, to revive the ailing US economy. The move, though, widely anticipated, spurred investors to snap up assets deemed relatively risky, such as commodities and their producers.
The Australian dollar rose to as high as $US1.0591, placing it on course for a weekly gain of about 2.4 per cent, or its best advance since late January.
Members of the ASX200's Materials sub-index led the charge among equities. The sub-indice gained 2.9 per cent for the day and 5.6 per cent for the week, the biggest weekly advance since early December.
The IG Markets analyst Cameron Peacock described the gains by miners as "absolutely textbook".
"The overall mining picture is being buoyed by quantitative easing," he said. "That's going to last through to the end of the year and into next year until the US economy shows signs of recovery."
Fortescue Metals missed out on the uplift. It entered a trading halt yesterday as it confirmed to the ASX that it is seeking a restructuring of its $9 billion debt load. The stock sank 14 per cent on Thursday, before the trading halt. Another 2 per cent fall in Chinese iron ore prices yesterday failed to dim the buying appetite for the miners.
"There's obviously a heavy composition of mining stocks [in the ASX200], so the fact that one stock is not trading is not going to have a massive impact on the overall performance of the sector for the day," Mr Peacock said.
BHP rose 53?, or 1.6 per cent, to $33.31, and Rio Tinto rose $1.53, or 1.5 per cent, to $56.58.
Goldminers climbed strongly. Australia's largest producer, Newcrest Mining, rose $1.93, or 7.3 per cent, to $28.36, while St Barbara rose nearly 14 per cent or 24? to $1.985, and Kingsgate rose 48?, or 10 per cent, to $5.33.
Gold was trading at six-month highs at around $US1775 an ounce.
Financial stocks also performed quite strongly. Among the banks, Westpac rose 31?, or 1.3 per cent, to $24.11, NAB rose 13?, or 0.5 per cent, to $25.41, Commonwealth rose 26?, or 0.5 per cent, to $55.28 and ANZ rose 9?, or 0.4 per cent, to $24.23.
"Everything has been exactly what'd you expect today," Mr Peacock said. "If you'd come in this morning and said 'what sectors do you expect to be up and down? Which ones do you think will be the best performers and the worst performers?' it has all played out according to plan."
After the US Federal Reserve chairman, Ben Bernanke, announced QE3, which will pump more money into the US economy and devalue its currency, the Australian dollar surged. It was trading around $US1.0590, around 2.4 per cent higher for the week, making it the best week since late January.
ALL ORDS AUSTRALIA
HIGH 4417.4
LOW 4372.9
4410.2
50.4 (1.2%)
SOURCE: BLOOMBERG
Frequently Asked Questions about this Article…
Why did Australian shares hit a four-month high and what role did QE3 play?
Australian shares rose to their highest close in more than four months after the US Federal Reserve unveiled QE3 — a third round of quantitative easing that will inject US$40 billion a month. The Fed move encouraged investors to buy riskier assets such as commodities and mining stocks, pushing the S&P/ASX200 higher and lifting the All Ordinaries.
How did QE3 affect the ASX200 and materials (miners) sector performance?
QE3 sparked a risk-on rally that helped the ASX200 finish the week up 64.2 points (about 1.5%) at 4,390. The ASX200 rose 50.6 points (1.2%) on the day. The Materials sub-index led gains, rising about 2.9% on the day and 5.6% for the week — its biggest weekly advance since early December.
What happened with Fortescue Metals and how did it impact the mining sector?
Fortescue Metals entered a trading halt after confirming it is seeking a restructuring of its roughly US$9 billion (article reports $9 billion) debt load. The stock sank about 14% the prior day before the halt. Market commentators noted Fortescue’s halt didn’t derail the broader mining rally because the ASX200 has a heavy composition of mining stocks.
Which major miners and gold companies moved on the QE3 rally and by how much?
Large miners rose on the rally: BHP gained to $33.31 (about 1.6%), Rio Tinto rose to $56.58 (around 1.5%). Gold producers climbed strongly — Newcrest Mining rose to $28.36 (about 7.3%), St Barbara rose nearly 14% to $1.985, and Kingsgate rose about 10% to $5.33, according to the article.
How did the Australian dollar react to the Fed’s QE3 announcement?
The Australian dollar strengthened after QE3, rising as high as US$1.0591 and on course for a weekly gain of roughly 2.4% — its best weekly advance since late January, driven by expectations of more US dollars entering global markets and a weaker US currency.
What happened to gold prices and why were gold miners performing well?
Gold climbed to six-month highs at about US$1,775 an ounce. Goldminers rose strongly as investors sought commodity exposure amid QE3, which tends to buoy precious metals by increasing liquidity and inflation expectations.
How did Australian bank stocks perform during the market rally?
Major Australian banks also rose: Westpac traded around $24.11 (up about 1.3%), NAB around $25.41 (up about 0.5%), Commonwealth Bank around $55.28 (up about 0.5%), and ANZ around $24.23 (up about 0.4%), reflecting broad market strength after the QE3 announcement.
What's the practical takeaway for everyday investors from this QE3-driven market move?
The article highlights a clear risk-on market response to QE3: commodities, miners and some financials led gains while the Australian dollar and gold strengthened. As analyst Cameron Peacock said, the moves were “textbook” and likely to persist while QE supports global markets — at least until the US economy shows signs of sustained recovery. Everyday investors should note how macro policy (like QE3) can quickly shift sector leadership and market sentiment.
Call 1300 880 160
Start a chat
Schedule a call
