The local sharemarket rose to a 4 1/2-year high yesterday as the economic outlook for the US and China brightened and eurozone worries eased, with National Australia Bank spiking higher on reports of a cost-cutting plan.
The benchmark S&P/ASX 200 closed up 0.8 per cent at 5116.8, its highest daily finish since September 2008. It hit an intraday high of 5131.6 after a government report showed fourth-quarter economic growth met expectations, and the figure for third-quarter growth was revised upwards.
The value of shares traded was $5.9 billion, beating the 20-day moving average of $5.2bn.
The index is up about 10 per cent this year, extending last year's 15 per cent advance. Yesterday's rise saw 50 companies hit their highest level in at least 12 months.
Wall Street's S&P 500 rose 1 per cent on Tuesday to finally erase losses tied to the global financial crisis. US investors took heart from a non-manufacturing purchasing managers index that expanded for the 39th straight month. The Dow Jones Industrial Average closed at a record high.
Also contributing to the rally offshore were remarks by Federal Reserve vice-chairman Janet Yellen at the start of the week that reiterated the Fed's commitment to its bond-buying program.
"The S&P/ASX 200 opened on a firmer footing and found a new wave of buyers after fourth-quarter GDP came in in line with expectations with upward revisions to the third quarter," said IG chief market strategist Chris Weston.
The Australian Bureau of Statistics said GDP rose 0.6 per cent from the third quarter and 3.1 per cent from a year earlier. Third-quarter growth was revised upwards to 0.7 per cent from 0.5 per cent. Economists had expected growth of 0.6 per cent in the fourth quarter and a 3 per cent gain from a year earlier.
The domestic GDP report showed Australia's resource-rich economy grew in the fourth quarter of 2012 supported in part by a recovery in commodity exports. The data also signalled that hefty interest-rate cuts through the year were starting to stoke activity.
"While interest rates may need to fall a bit further, green shoots of recovery are starting to emerge and suggest we are at or near the low for rates and, more importantly, point to an improvement in economic and profit growth on a 12-month horizon," said AMP Capital's director of investment strategy and chief economist, Shane Oliver.
He expected earnings growth to push the S&P/ASX 200 up to 5250 by the end of the year.
NAB shares closed up 0.8 per cent at $30.83 after hitting a 3 1/2-year high of $31.34 following a media report the bank planned to cut $900 million in costs over the next five years in a bid to boost profits.
Fortescue rose 3.7 per cent to $4.50 on large-scale buying, after hitting a three-month low of $4.21 as spot iron ore fell 2.4 per cent to $US145.20 a tonne. Traders said Fortescue's earnings would be stronger than expected if iron ore prices stabilised around $US150.
The Australian dollar, meanwhile, rose strongly yesterday, in line with rising share prices globally and news that the economy grew solidly in the fourth quarter of 2012.
In late afternoon trading, the Aussie bought $US1.0280, against $US1.0243 late in local trade on Tuesday. It traded as high as $US1.03 in Asia.
