The Australian sharemarket roared back yesterday, recovering most of its 75-point loss on Monday, after a US Federal Reserve official reiterated the central bank's commitment to quantitative easing, local retail sales exceeded expectations and China's sharemarket stabilised.
China's National People's Congress was being watched for clues on how the new regime plans to rebalance its economy from an over-reliance on housing construction.
The benchmark S&P/ASX 200 closed up 1.3 per cent at 5075.4 after rising as high as 5095. Share trading value grew to $6 billion versus the 20-day moving average of $5.2bn.
"Cash, bonds and property remain less attractive than equities," said Patersons investment adviser Peter Morgan. "Cash was king for a while, but the pendulum has swung in favour of shares."
Retailers including Harvey Norman, Myer and David Jones jumped between 2.3 and 3.5 per cent as retail sales rose 0.9 per cent in January -- the biggest rise in seven months, exceeding a 0.4 per cent rise expected by economists.
Packaging company Amcor surged 3.1 per cent, and property trust Goodman rose 2.4 per cent.
Resources stocks underperformed, with BHP Billiton, Newcrest and Fortescue down between 0.3 and 0.7 per cent.
Nufarm dived 12 per cent after Monsanto said it would end a distribution agreement for the Roundup-branded glyphosate herbicide in August. Nufarm said it expected to maintain a strong presence in glyphosate and expected no material impact on earnings after the Roundup distribution agreement ceases. "The market feels toppy, so every time there's a wobble overseas, people are panicking and taking profit or getting out of shares," said RBS Morgans investment adviser Christopher Macdonald.
"The storm passes, and people realise their cash isn't earning much interest, and they pile back into equities.
"There's definitely a herd mentality."
The Australian dollar rebounded after the RBA left interest rates unchanged and indicated there was little rush to cut rates.
The rebound was also helped by the strong retail data, which stoked talk that the low interest rate has been helping to drive a recovery in consumer spending.
At 5pm AEDT, the dollar was buying $US1.0244, up US1.19c. On Monday, it had slumped US1.11c.
In holding rates steady, RBA governor Glenn Stevens cited a modest improvement in non-mining parts of the economy and increasing ease about conditions in Europe and China.
Still, the RBA statement said low inflation would keep the door open for further rate cuts should the economy slow unexpectedly.
"We continue to expect the RBA has room to cut rates once more by 25 basis points, given the remaining pockets of weakness in the domestic economy," said St George economist Janu Chan. "However, we believe the RBA will need . . . more time to assess how earlier rate cuts are taking effect."
CommSec chief economist Craig James welcomed the RBA's move. "Last month consumer confidence soared almost 8 per cent in response to the decision to leave rates unchanged," he said. "If consumers are similarly happy after today's rate decision, then retailers and other consumer-focused businesses will have reason to cheer."
Attention will now turn to the release of fourth-quarter economic growth data today. Economists expect the economy to have expanded by about 3 per cent over the year to December 31.
Consumer staples surged, with Woolworths, Wesfarmers and Coca-Cola Amatil rising between 2.7 per cent and 3.4 per cent.
Westpac led major banks with a 2.9 per cent jump, while Bendigo and Adelaide Bank rose 3.9 per cent and Bank of Queensland surged 3.5 per cent.
