THE sharemarket posted its second straight day of solid rises after gains overseas sparked hopes for a pick-up in the world economy.
The S&P/ASX 200 Index closed 35.3 points, or
0.85 per cent, higher at 4187.5 near its highest in four weeks.
Growing evidence that the US recovery is strengthening sparked a wave of optimism in global markets and trumped concerns over Europe's debt crisis.
"Some analysts are even redirecting their sentiment and encouraging a 'forget Europe, buy US stocks' mentality," said CMC Markets trader Andrew May.
Yet volumes remained light, with 1.6 billion shares traded at a value of $3.7 billion, as investors remained wary about committing money in the run-up to bond auctions in Spain and a policy meeting of the European Central Bank tonight.
A slump in Australian job vacancies data did little to encourage those still wary about the health of the economy as they mulled the continuing fallout from Europe.
Welcoming the market's back-to-back gains, CommSec market analyst Steven Daghlian said that in the past six weeks there had been only three occasions when this had happened. "But we're still seeing investors not keen to lock up too much of their funds at the start of the year and there's a lot of volatility in the market," he said.
The materials sector rose 1.6 per cent, leading the market higher after strength in commodity prices overnight. It was closely followed by a 1.4 per cent gain in energy stocks.
BHP Billiton closed up 1.5 per cent at $36.18 and Rio Tinto gained 1.6 per cent to $64.19.
Shares in African Iron jumped 40 per cent to 56? after South African mining company Exxaro announced plans to buy the Republic of Congo-focused miner for $338 million.
Newcrest, which hit a low of $29.51 at the end of last month, added to recent gains with a rise of 57? to $US32.75 as gold moved higher. At the close in Australia, spot gold was up $US16.49 at $US1636.25 an ounce.
The financials sector put on 0.7 per cent. Mr Daghlian said investors would be keeping an eye out for earnings from JPMorgan in the US tomorrow night, when it would become the first of the big US-based banks to release results.
"That could set the tone from the banking sector for the next few weeks," he said.
Among the day's biggest losers were the telecoms stocks, which lost 1.7 per cent as investors pulled out money from the traditionally defensive industry in favour of riskier assets.
Frequently Asked Questions about this Article…
Why did the ASX 200 rise and what drove the Australian sharemarket higher today?
The S&P/ASX 200 rose 35.3 points (0.85%) to 4,187.5, supported by optimism from stronger US economic signals that lifted global markets. Commodity strength helped the materials and energy sectors lead gains, while falling concerns about Europe were outweighed by hopes for a pick-up in the world economy.
Which sectors led gains on the ASX and why should investors care about the materials and energy bounce?
The materials sector rose about 1.6% and energy stocks gained roughly 1.4%, driven by overnight strength in commodity prices. For everyday investors, a lift in these sectors often reflects higher commodity demand and can boost large miners and resource-exposed portfolios.
How did major miners like BHP Billiton and Rio Tinto perform and what does that mean for resource investors?
BHP Billiton closed up 1.5% at $36.18 and Rio Tinto gained 1.6% to $64.19. These moves show resource heavyweights generally benefited from stronger commodity sentiment, which can improve returns for investors with exposure to large-cap miners.
What happened with African Iron and the Exxaro takeover news?
Shares in African Iron jumped about 40% after South African miner Exxaro announced plans to buy the Republic of Congo–focused company for US$338 million. Takeover interest can sharply lift small‑cap mining stocks when an acquirer surfaces.
How did gold and Newcrest perform, and what were the spot gold prices reported?
Newcrest continued recent gains and was trading at US$32.75 as gold moved higher. At the Australian close, spot gold was reported up US$16.49 at US$1,636.25 an ounce, which supported gold‑exposed stocks like Newcrest.
Why were trading volumes light and what risks were investors watching?
Volume was relatively light — about 1.6 billion shares traded worth roughly $3.7 billion — as investors stayed cautious ahead of Spanish bond auctions and a European Central Bank policy meeting. Uncertainty around Europe and upcoming events kept many from committing large sums.
What are the near‑term events investors should watch that could affect Australian stocks?
Key near‑term events mentioned include Spanish bond auctions and a European Central Bank policy meeting, plus US bank earnings starting with JPMorgan. JPMorgan’s results could set the tone for the banking sector, while European developments may sway global risk sentiment.
Why did telecom stocks fall while investors moved into riskier assets?
Telecoms, traditionally defensive, fell about 1.7% as investors rotated out of defensive sectors and into riskier assets like materials and energy after positive global cues. Sector rotations like this reflect changing investor appetite for risk.
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