The sharemarket rose yesterday as defensive and high-yield stocks had broad-based gains after stronger-than-expected German business confidence data brightened the eurozone economic outlook and US earnings reports beat expectations.
The market brushed off disappointing Chinese manufacturing data, but fund managers cautioned that the market was vulnerable to European political uncertainty and concern about US spending cuts.
Consumer discretionary, consumer staples, telecoms and financial companies outperformed the index, while resources underperformed after commodity prices slipped.
The benchmark S&P/ASX 200 closed up 0.8 per cent at 5055.8 points after hitting a two-day high of 5064.3.
Share-trading value contracted to $4.6 billion after expanding to $7.5bn on Friday due to options-related activity.
The index recovered after plunging to a six-day low last week following the US Federal Reserve's comments that many of its members were concerned about the risks of its open-ended money-printing campaign.
Among yesterday's standouts, Westpac, National Australia Bank, Telstra, Wesfarmers, Westfield, Telstra and Santos rose between 1.1 per cent and 3.2 per cent.
Ten Network surged 6.8 per cent after CLSA analyst Digby Gilmour said the chances of News Corporation moving to take over Ten Network rose after the free-to-air broadcaster appointed a former senior News executive, Hamish McLennan, as the new chief executive. News owns The Australian and Dow Jones Newswires.
Resources lagged the broader market, with Rio Tinto down 0.9 per cent after spot iron ore fell 1.7 per cent.
HSBC's preliminary reading of its China manufacturing purchasing managers index fell to 50.4 in February, from 52.3 in January. But the February reading still marked the fourth straight month that the index has been in expansionary territory, showing that manufacturing grew in February but at a slower pace than in January. "The Chinese economy is still on track for a gradual recovery. Despite the moderation of February's flash PMI, the index recorded the fourth consecutive reading above the 50 critical line," HSBC economist Qu Hongbin said.
In a positive sign for Australia's third-biggest trading partner, Japanese Prime Minister Shinzo Abe plans to nominate Haruhiko Kuroda as Bank of Japan governor. "The weekend news flow has been all about Haruhiko Kuroda getting the gig as the new BoJ head, with Kikuo Iwata as deputy," said IG Markets chief market strategist Chris Weston. "We feel this potential combination is significant and very market-friendly."
However, Perpetual Investments market research chief Matt Sherwood said the Australian sharemarket had probably seen most of its rise for the year.
"The market rally at present is running on thin air," he said. "March is typically a month of below-average returns in Australia and the US and volatility could pick up given the US sequester, Italian election and Spanish corruption scandal ahead of us."
