The Australian sharemarket had its strongest day in almost two weeks yesterday, outstripping minor gains on Wall Street as strength in healthcare stocks, banks, telecommunications and consumer discretionary companies offset a drop among iron ore producers.
The market brushed off a disappointing consumer confidence reading. The Westpac/Melbourne Institute index of consumer sentiment index showed only a small rise this month, despite a spate of interest rate cuts from the Reserve Bank last year. The survey added to evidence that a slowdown in China last year was hurting more than just the country's mining sector.
Westpac chief economist Bill Evans said consumer confidence was proving sluggish despite the fact that the central bank last year cut interest rates to 3 per cent, the lowest level since the aftermath of the global financial crisis.
CSL surged 3.5 per cent after Macquarie Equities said a positive pricing environment for immunoglobulin should drive continued margin expansion for the blood-products maker this year.
Elsewhere, Commonwealth Bank, National Australia Bank, Telstra, Westfield, News Corporation, Newcrest Mining, IAG and Amcor rose between 0.5 per cent and 1.8 per cent.
On the downside, BHP Billiton, Rio Tinto and Fortescue Metals fell between 0.5 per cent and 1.5 per cent after spot iron ore declined 1.1 per cent to $US152.90 a tonne. The price of iron ore had surged more than 80 per cent since early September, fuelling doubts about whether prices would be able to stay high in the medium term.
The benchmark S&P/ASX 200 index closed up 0.5 per cent at 4738.4, outperforming a 0.1 per cent rise in the US S&P 500 that followed stronger-than-expected US retail sales data.
"I think investors are still underweight equities, and with the fiscal logjam in the US clearing, China's economy stabilising and the potential for a financial catastrophe out of Europe receding, they need to increase their exposure to equities," said Michael McCarthy, chief market strategist at CMC Markets.
Building materials maker Boral jumped 10 per cent after saying it would shed 1000 jobs from its global operations this fiscal year as it tries to reduce costs amid weaker demand for its building materials.
EL&C Baillieu Stockbroking director Richard Morrow said market sentiment shifted swiftly amid thin trading volumes.
"Having a big manufacturing business like Boral bite the bullet on the Aussie dollar and start to make structural readjustment, that can and usually does lead to the same sort of thing happening in other sectors," Mr Morrow said.
"It's caught a lot of investors by surprise and sparked a lot of short covering in that stock, and that's gravitated out into other stocks."
Another building materials producer, James Hardie, rose 0.9 per cent after an upgrade.
