Australian shares flirted with five-year highs on Monday, returning to levels not seen since the onset of the global financial crisis, as investors were spurred on by signs of strength in the US economy.
Gains in the sharemarket are translating into bigger superannuation returns with balanced super funds - the most widely held funds - on track to deliver their highest returns in 15 years.
The rebound highlights growing confidence among investors after years of shunning the sharemarket in favour of low-risk investments such as bonds or bank deposits.
The median growth fund surged 2.2 per cent in April to bring the return for the financial year to date to 15.4 per cent, according to figures by super fund tracker Chant West.
"That was the highest single-year return in the past 15 years, and it could well be bettered this year," said Chant West director Warren Chant.
The S&P/ASX 200 index on Monday closed up 0.5 per cent at 5209 points. This is the second time within a week that the benchmark index tested a near five-year high. Last Thursday the market closed at 5224 points.
These levels were last seen in June 2008. Three months later Wall Street bank Lehman Brothers collapsed, marking the beginning of the global financial meltdown.
The latest surge in equities was a sign that positive sentiment was returning to the market, Mr Chant said. "The resurgence has been quite remarkable, given that it has been achieved against an economic background that is still so patchy," he said.
Monday's rally pushed Commonwealth Bank shares to a record closing price of $73.49, reigniting the debate over whether big bank shares are overpriced.
According to analysts at UBS, the Commonwealth has become the most expensive large bank in the world when assessed by its share price relative to the size of its loan book. Its price to earnings multiple has also hit record highs, the analysts said.
"This makes CBA the most expensive large bank in the world by nearly every measure," UBS analyst Jonathan Mott wrote in a note published last week. Other big banks including National Australia Bank and Westpac finished higher.
The Australian dollar - which has spent the past week in a downward spiral - ended the local session slightly firmer. Late on Monday the currency was buying US97.57¢, up from US97.37¢ on Friday.
Jamie Spiteri, of Shaw Stockbroking, said investor confidence had picked up from last week, when concerns over the weakness of the dollar dominated local sentiment.
"Some of the stocks that were negative last week have reversed," he said. "BHP was noticeably stronger, [as were] other sections of the resource market that would benefit from a weak Australian dollar."
Stocks were buoyed by a strong overnight lead on Wall Street, which was driven by more robust consumer confidence data.
Weakness in commodities weighed on the market, with gold falling for an eighth-straight session to its weakest level in over a month. This put gold stocks under pressure, with the sector falling 2.2 per cent. Iron ore also came under pressure as traders prepared for a weak outlook from Chinese inventories.
Commonwealth Bank currency strategist Peter Dragicevich said the dollar moved a little higher due to some softness in the US dollar and gains on stock markets. The key event for currency markets this week would be a speech by US Federal Reserve chairman Ben Bernanke on Wednesday (US time).
If Dr Bernanke provided an indication the Fed would start to wind back its stimulus measures, in recognition of improvements in the economy, the US dollar was likely to rally, pushing its Australian counterpart lower, Mr Dragicevich said.
But if Dr Bernanke indicated the Federal Reserve would stick with its asset-buying program, the US dollar was likely to be sold off, pushing the Australian dollar higher.
Elsewhere, Tokyo's Nikkei index gained 1.5 per cent to its highest level since December 2007 as investors renewed their hopes for Tokyo's growth policy.