The sharemarket surged to its highest closing level in almost five years yesterday, with the materials sector leading relatively broad-based gains after China reported stronger than expected trade data, Wall Street hit record highs and spot iron ore rose for the first time in almost a month.
The benchmark S&P/ASX 200 closed up 1.1 per cent at 5199.8, its highest close since June 2008. Share trading value worth $5.9 billion was well above the 20-day moving average of $4bn.
Mining giants BHP Billiton and Rio Tinto jumped 1.9 per cent and 2.6 per cent respectively, as a rise in China's imports of raw materials and exports of finished goods gave hope that economic growth in Australia's biggest trading partner could be levelling at 7.5 per cent a year.
China reported a trade surplus of $US18.16bn ($18.25bn) for last month, against the $US15.5bn surplus forecast by economists. Exports rose 14.7 per cent from a year earlier, above a market consensus of 8.5 per cent. Imports rose 16.8 per cent, which was also above market consensus of 11.2 per cent.
"April's trade figures were clearly stronger relative to economists' depressed expectations following disappointing Chinese GDP and PMI readings," said BBY institutional dealer Anson Rosewall. "It suggests that the Chinese growth engine remains switched on, especially with iron ore imports remaining healthy."
Matthew Sherwood, head of investment market research at Perpetual, said: "At present, markets are driven by heightened stimulus and the fact that economic data remains in the Goldilocks range: weak enough to warrant continued stimulus but strong enough to keep earnings expectations positive.
"In this world, investors need to remain cautious."
Among other miners, Fortescue Metals jumped 5.4 per cent, OZ Minerals gained 6.3 per cent and Atlas Iron rose 13 per cent.
Traders said Asian hedge funds were covering short positions on Atlas Iron amid reports of a looming deal that could allow it access to Fortescue's rail network, potentially making it economical to expand Atlas's iron ore mining operations in the Pilbara region of Western Australia.
Seven West Media jumped 10 per cent after it said it was past the worst of an industry-wide advertising malaise. The broadcaster and publisher forecast a modest fall in underlying profit for fiscal year 2013, but chief executive Don Voelte said: "We believe fiscal 2013 was the worst of it for our company on a net profit basis."
Major banks were also strong after recent dividend increases and stronger than expected earnings in the sector. National Australia Bank gained 1.3 per cent before its first-half earnings report today.
Among stocks that fell, CSL dived 5.2 per cent after the failure of an intravenous immunoglobulin treatment for Alzheimer's by its rival, Baxter. CSL is the world's No 2 maker of IVIG products behind Baxter.
The dollar bounced off fresh two-month lows in Asia yesterday on the back of the strong Chinese trade data, snapping a week-long decline.
China swung back to a trade surplus last month, reversing a deficit in March. The $US18.2bn surplus was higher than an expected $US15.6bn, with growth in imports and exports exceeding forecasts.
At 5pm AEST, the dollar was trading at $US1.0201, having earlier hit a low of $US1.0155, its lowest level since March 4.
"Overall, the Chinese economy is running at a solid pace and other global economies are still buying Chinese products in healthy quantities," CommSec chief economist Craig James said. "The data is good news for Australian resource producers because China needs raw materials to churn out the finished goods."
