Australian shares posted their second straight day of gains after a rise offshore markets sparked hopes for a pickup in the world economy.
Shares ended near their highest point in four weeks as a growing belief in the health of the US economy sparked a wave of optimism in global markets and trumped ongoing concerns over Europe’s debt crisis.
“Some analysts are even redirecting their sentiment and encouraging a ‘forget Europe, buy US stocks’ mentality,” CMC Markets trader Andrew May said.
At the close on Wednesday the benchmark S&P/ASX200 index was up 35.3 points, or 0.85 per cent, at 4,187.5, while the broader All Ordinaries index was up 36.3 points, at 4,242.9.
On the ASX 24, the March share price index futures contract was up 41 points at 4,163 with 25,544 contracts traded.
Yet volumes remained light, with 1.6 billion shares traded at a value of $3.7 billion, as investors remained cautious of committing money to the market ahead of Spanish bond auctions and a European Central Bank policy meeting later on Thursday.
A slump in jobs vacancies data did little to encourage investors, who remained wary over the health of the economy as they mulled the ongoing fallout from Europe.
“Over the past six weeks or so we’ve only seen two days of gains in a row three times so that’s a good sign,” said Commsec market analyst Steven Daghlian.
“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.”
Materials led the market higher as commodity prices rose, adding 1.6 per cent, closely followed by a 1.5 per cent gain in energy stocks.
BHP Billiton rose 1.5 per cent to $36.18 and Rio Tinto gained 1.6 per cent to $64.19.
The spot price of gold closed at $US1,636.25 per fine ounce, up $US16.495 from Tuesday’s local close of $US1,619.755 per fine ounce.
Shares in African Iron jumped 40 per cent to 56 cents after South African mining company Exxaro announced plans to buy the Republic of Congo-focussed miner for $338 million.
Santos underperformed the energy sector after it said it will shut oil production from its Mutineer-Exeter oil field offshore – the latest company to face disruptions from Tropical Cyclone Heidi.
Financials rose 0.7 per cent, with Commonwealth Bank and National Australia Bank both up 0.3 per cent at $49.94 and $23.57 respectively, ANZ Bank up 1.6 per cent at $21.08 and Westpac the biggest gainer of the big four at $20.63, up 2.1 per cent on the day.
Mr Daghlian said investors will be keeping an eye out for earnings from JP Morgan in the US on Friday night, 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.