The share market has enjoyed its best day since Christmas as it rode a growing wave of expectation of a Reserve Bank rate cut.
The All Ordinaries rose 104.5 points, or 1.8 per cent, on Thursday, with strong gains in the high-yield banking and finance sector.
IG market strategist Evan Lucas said it was the strongest session since December 22 as investors traded with the belief that a rate cut by May is more or less certain.
“Rate cuts are now not only well and truly back on the cards but pretty much a certainty,” he said.
“That’s why there’s been such a drive back to the banks today – it’s all about that yield trade.”
Wall Street shares surged overnight after the US Federal Reserve trimmed its economic forecast and flagged a cautious approach to a long-awaited rate hike.
The Australian dollar in turn rose against the greenback, lifting expectations that the RBA will pass a rate cut in the coming months to revive the local economy.
Mr Lucas said the 30-day cash market in Australia is pricing at levels assuming a 98.6 per cent chance of a rate cut by May.
The four big banks each rose by around two per cent and Commonwealth Bank, ANZ and Westpac all hit record highs, Mr Lucas said.
Commonwealth rose $2.22 to a record $95.61, ANZ added 71 cents to $36.63 and Westpac closed $1.03 higher at $39.71.
National Australia Bank added 86 cents, or 2.66 per cent, to $39.71.
Telstra also benefited from yield-chasing investor activity, rising 11 cents, or 1.8 per cent, to $6.41.
Among the miners, iron ore pure play Fortescue Metals rebounded strongly from a weak session the day before to rise 12.5 cents, or 6.7 per cent, to $1.99.
Mining giant BHP Billiton added 38 cents to $30.58 and Rio Tinto rose eight cents to $58.30.
The energy sector also lifted, with Woodside Petroleum up 45 cent at $35.31, Santos was nine cents better off at $7.15 and explorer Oil Search gaining one cent to $7.57.
Myer however had no such enjoyment as its shares slumped 15.5 cents, or 10.1 per cent, to $1.375, after the retailer unveiled a dismal first half year profit result.
KEY FACTS
* At the close on Thursday, the benchmark S&P/ASX200 index was up 108.5 points, or 1.86 per cent, at 5,950.8 points.
* The broader All Ordinaries index was up 104.5 points, or 1.85 per cent, at 5,912.5 points.
* The June share price index futures contract was up two points at 5,962 points, with 40,669 contracts traded.
* The price of gold in Sydney at 1700 AEDT was $US1,171.79 per fine ounce, up $US22.39 from $US1,149.40 on Wednesday.
* National turnover was 1.69 billion securities worth $5.64 billion.
