you're reading...
Australian Current Affairs

Australian stocks surge to 19-month high as US fiscal cliff averted

02 Australian Stock ExchangeTHE sharemarket started 2013 with a bang as US lawmakers agreed a budget deal to avoid the worst of the so-called fiscal cliff that had threatened to derail the world’s biggest economy.

The benchmark S&P/ASX 200 closed up 1.2 per cent at a 19-month high of 4705.9, also after better Chinese manufacturing data helped lift commodity prices overnight.

The value of shares traded was $2.3 billion, a little more than half the 2012 daily average of $4.1 billion, as many brokers and investors remained on holiday.

“This removal of the fiscal cliff threat provides a positive backdrop for Australia,” said Shane Oliver, chief economist and head of investment strategy at AMP Capital Investors. Sharemarkets worldwide will gain from the consequent pick-up in the US economy, alongside improvements in China and Europe, he added in a note to clients.

Australian shares rose 15 per cent in 2012 as a US recovery showed signs of strengthening and China’s economy appeared to rebound from a partially-engineered slowdown. The advance almost erased two straight years of losses for the S&P/ASX 200 driven in large part by concern over Europe’s sovereign-debt crisis.

BHP Billiton rose 2 per cent and Fortescue Metals surged 5.8 per cent today after spot iron ore added 3.9 per cent on Monday. Woodside Petroleum gained 1.5 per c nt following a 1 per cent rise in Nymex crude oil, while Newcrest Mining climbed 3.6 per cent after spot gold advanced 1.2 per cent  on Monday.

Commonwealth Bank of Australia led the major banks with a 0.9 per cent rise, while QBE Insurance increased 3.7 per cent. Traditionally defensive stocks were mixed, with telecommunications firm Telstra up 1.6 per cent, and CSL, a blood-products maker, falling 0.4 per cent.

Wednesday’s S&P/ASX 200 gain, the biggest in five months, capped an 8.5 per cent rally over the past seven weeks. That followed a four-week sell-off from mid-October to mid-November as investors fretted over the looming fiscal cliff in the midst of the U.S. presidential election.

Congress broke a rancorous stalemate by passing legislation that blocked most impending tax increases and postponed spending cuts, largely by raising taxes on upper-income Americans. That ended a tortured drive by Congress to avert the fiscal cliff, a journey that ended up technically breaching the January 1 deadline.

AMP’s Mr Oliver said the removal of the fiscal cliff threat considerably brightened the outlook for both Australia’s economy and sharemarket, at a time when a fading mining boom is widely seen as having dampened the resource-rich country’s prospects.

The S&P/ASX 200 was likely to reach the 5000 level by the end of 2013, resulting in a total return for investors of around 12 per cent this year, the Sydney-based fund manager added.

Source: The Australian

About Craig Hill

Social Justice Campaigner, Writer, Teacher and Business Consultant. Lived in China and USA. Dealing with disability. My articles have been cited in New York Times, BBC, Fox News, Aljazeera, Philippines Star, South China Morning Post, National Interest, news.com.au, Wikipedia and many other international publications. Please consider donating, to support our social justice campaign, by clicking on the "Donations Page" button in the top menu.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

If you liked what you just read, click "Subscribe" to become a follower of the Craig Hill site. You will receive an email each time a new post is published.

Join 1,803 other subscribers

Advance Institute of Business has nationally recognised Australian Business qualifications. Click here to find out more.

%d bloggers like this: