The Australian share market rallied to close at a one-year high, as strong earnings from US investment bank JPMorgan encouraged investors that company profits are likely to improve.
But the market fell back from earlier highs as some investors judged it a good price to sell stocks, and as comments from Reserve Bank Governor Glenn Stevens suggested further rate rises would come sooner rather than later.
At the close, the benchmark S&P/ASX200 index was up 28.8 points, or 0.6 per cent, at 4859.9, while the broader All Ordinaries had added 28.5 points, or 0.6 per cent, to 4862.5 points.
Materials stocks rose 1 per cent, bank shares gained 0.6 per cent and the energy sub-index rose 0.4 per cent.
'‘The market went up on the JPMorgan result and we’ve got other big bank results over the next few days,’’ Cameron Securities client adviser Adrian Leppinus said. ‘‘The pull-back was on a bit of profit taking more than anything else.’’
The comments from Mr Stevens reminded investors that ‘‘interest rates aren’t going down and are only going up’’.
Mr Stevens also said the period of greatest weakness in Australia was ‘‘probably past’’ and the risks of really serious economic weakness had ‘‘abated’’. As the economy gradually expanded, the central bank governor said monetary policy needed to be ‘‘recalibrated’’ to reflect the changing circumstances.
Most of the big four banks benefited, with Westpac adding 30 cents, or 1.1 per cent, to $27.10, Commonwealth Bank gaining 55 cents to $55.52 and ANZ up 11 cents at $24.91.
But National Australia Bank declined 17 cents, or 0.5 per cent, to $31.75 after saying it would abolish monthly account service fees on two of its everyday banking accounts from January 2010 and scrap its $25 over-limit fee on all credit cards.
Bank of Queensland gained 27 cents, or 2.2 per cent, to $12.60 after increasing full-year cash profit 21 per cent and making positive comments on its growth outlook.
Also supporting the market were the miners and energy stocks.
Matt Lewis, senior dealer with CMC Markets, said increasing base metal prices and oil rising past $US75 per barrel boosted local miners and energy producers.
BHP Billiton gained 50 cents, or 1.3 per cent, to $38.90 and rival Rio Tinto added $1.54, or 2.4 per cent, to $64.79.
The two miners announced changes to a planned $US116 billion ($127 billion) merger of Pilbara iron ore assets after the market closed.
In a move possibly aimed at appeasing regulators, the mining companies said they would be scrapping plans to jointly market up to 15 per cent of production from their operations in Western Australia’s Pilbara region.
Oil Search jumped 11 cents, or 1.6 per cent, to $6.80, Santos gained 18 cents, or 1.2 per cent, to $15.54 and Woodside Petroleum advanced 57 cents, or 1.1 per cent, to $53.20.
Gold stocks fell, however, as the gold price also fell.
The spot price of gold in Sydney was $US1064.00, down $US4.87 on Wednesday’s closing price of $US1068.87.Lihir Gold dropped 11 cents, or 3.3 per cent, to $3.22 and Newcrest Mining fell 48 cents, or 1.3 per cent, to $36.62.
Other stocks to drag on the market were Telstra, falling 3 cents to $3.13, and Wesfarmers, declining 58 cents, or 2.2 per cent, to $26.32.
Most of the other retailers gained, with Woolworths adding 52 cents, or 1.8 per cent, to $29.75, Harvey Norman rising 12 cents, or 2.6 per cent, to $4.76 and JB Hi-Fi jumping $1.08, or 5.6 per cent, to $20.50 as six analysts upgraded the stock, according to Mr Lewis.
JB Hi-Fi on Wednesday delivered an 8.4 per cent jump in September quarter comparable store sales and said it would lift its 2010 target new store openings to 22.
Other cyclical stocks also did well, with the increased optimism of economic growth.
Boral gained 29 cents, or 4.8 per cent, to $6.36, James Hardie rose 35 cents, or 4.5 per cent, to $8.09, Reece Australia added 90 cents, or 3.9 per cent, to $24 and Virgin Blue increased 2 cents, or 4.1 per cent, to 51 cents.
In other news, Suncorp-Metway sold real estate business Hooker Corp to the grandson of its founder for $67 million. Suncorp declined 6 cents, or 0.7 per cent, to $9.15.
Miner OZ Minerals scaled back its full year production forecast for copper, after its third quarter was hampered by blast misfires and unplanned shutdowns. The stock added 1 cent to $1.32.
Infrastructure and engineering company Downer EDI said it had made significant progress in improving the business and reiterated earnings guidance for the 2010 financial year. Downer EDI rose 17 cents, or 1.9 per cent, to $9.10.
Focus Minerals was the most traded stock by volume, with 113.7 million shares worth $6.41 million changing hands. Focus stock lost 0.3 cents to 5.4 cents.
Total market turnover was 3.69 billion shares worth $5.79 billion, with 653 stocks up, 507 down and 350 steady.