Australian shares closed at their highest level in five weeks after better than expected Chinese economic growth buoyed already optimistic investor sentiment, after a successful French debt auction overnight.
The world’s second-largest economy grew by 8.9 per cent in the three months ending in December, data showed on Tuesday.
Although that was the slowest rate of expansion for 30 months, it exceeded analysts’ expectations of around 8.5 per cent growth.
Australian shares extended early gains driven by a strong sale of French treasury bills overnight, despite news that the European Union’s second-largest economy was stripped of its top credit rating by Standard and Poor’s on Friday.
News that Fortescue Metals, Australia’s third largest iron ore producer, and Rio Tinto exceeded their iron ore production targets also helped resources stocks to post gains of more than two per cent.
“With Chinese data failing to fall off a cliff as some analysts suspected, the hard landing scenario is looking unlikely in the short term,” said IG Markets’ Stan Shamu.
At the close on Tuesday, the benchmark S&P/ASX200 index was up 68.4 points, or 1.7 per cent, at 4,215.6, while the broader All Ordinaries index was up 68.8 points, or 1.6 per cent, at 4,277.7.
On the ASX 24, the March 2012 share price index futures contract was up 58 points at 4,186, with 23,074 contracts traded.
Energy stocks led the pack, adding 2.7 per cent to claw back Monday’s losses after oil and metals prices rallied despite a raft of downgrades to Europe’s sovereign debt status overnight.
Fortescue Metals added 3.9 per cent, or 18 cents, to $4.80, after the company announced it shipped a record 14.77 million tonnes of iron ore in the December quarter while reducing production costs.
Rio Tinto gained 1.25 per cent, or 81 cents, to $65.70 after the mining giant’s global iron ore operations produced a record 65 million tonnes in the three months to December 31, beating analysts’ forecasts.
The results added to hopes that BHP Billiton – the market’s heftiest stock – would top its own expectations when it reports its production results on Wednesday.
BHP Billiton added two per cent, or 72 cents, to $36.70, its highest close since December 8.
“The latest announcement from Fortescue is helping confidence in the mining sector,” Commsec chief economist Craig James said.
“We’re at the point where China is looking to invigorate their economy and this is going to help our mining sector.”
Wesfarmers climbed 1.8 per cent, or 55 cents, to $30.55 after it announced that its coal production for the December quarter at its Curragh mine was 2.2 million tonnes, 1.7 per cent down on the previous quarter.
Uranium miner Paladin Energy surged 11.8 per cent, or 11.76 per cent, to $1.72 after it reported record production in the three months to December and re-affirmed full-year production targets.
Shares in Arafura Resources climbed 25 per cent, or 9.5 cents, to 47.5 cents after the minerals explorer reported it has successfully produced rare earths oxide samples for potential customers.
The price of gold closed in Sydney at $US1,658.76 per fine ounce, up $US20.11 from $US1638.65 on Monday.
Volumes were light, with 1.59 billion shares traded for $3.68 billion as US markets were closed on overnight on Monday for the Martin Luther King public holiday.
There were 674 stocks up, 264 down and 383 steady.
