The sharemarket closed higher for a second day yesterday, buoyed by a last-minute budget deal in the US that drove global equities and commodity prices sharply higher on Wednesday night.
The benchmark S&P/ASX 200 finished up 0.7 per cent at 4740.7, the highest closing level since May 2011. The gauge, which climbed 1.2 per cent on Wednesday, has risen almost 10 per cent in the past seven weeks as the market anticipated that a recession-averting budget deal would eventually be struck.
The index was up 14.6 per cent last year, erasing most of a two-year fall as Europe took steps to deal with its debt crisis, domestic interest rates fell to post-financial-crisis lows, and Australia's major trading partners moved to stimulate their economies.
"There are plenty of bullish catalysts supporting the local market," said BBY institutional dealer Anson Rosewall. "China has continued to produce much stronger economic data, and key commodities have climbed substantially."
Iron ore producers including BHP Billiton, Rio Tinto and Fortescue Metals rose between 0.8 per cent and 2.4 per cent as prices for the steelmaking ingredient remained firm, having risen 67 per cent since September 5.
OZ Minerals surged 6 per cent following a 3.5 per cent jump in London Metals Exchange copper. Newcrest Mining climbed 3.1 per cent after spot gold gained 0.7 per cent, and Woodside Petroleum advanced 0.7 per cent following a similar increase in Nymex crude oil prices early yesterday.
Banks and insurers fared well too, with Commonwealth Bank closing up 0.8 per cent, QBE Insurance adding 2.6 per cent and AMP rising 1.4 per cent.
Telstra rose 0.9 per cent, reflecting continued demand for high-yield stocks.
"It's been a stellar day for CBA and Telstra," said IG market strategist Evan Lucas. "The risk-on trade is certainly building, but demand for high-yield stocks is continuing as interest rates are likely to remain low."
Earlier yesterday, the S&P 500 Index rose 2.5 per cent in New York, the biggest one-day gain in more than 12 months, after congress reached a last-minute deal to avert the so-called fiscal cliff that had been threatening to choke the US economy.
That added to optimism about Australia's resources-focused economy after Chinese manufacturing data exceeded expectations on Monday, helping push iron prices to an eight-month high.
BBY's Mr Rosewall said the S&P/ASX 200 remained on track to hit 5000 in the coming months, but cautioned that a pullback was possible before the upcoming corporate-earnings season in Australia and the US.
The Australian dollar remained strong in Asian trade even as investors worried that US politicians were on course for a collision over how to raise the nation's $US16.4 trillion debt ceiling.
At 5pm AEDT, the dollar was buying $US1.0484, up US0.11c.
