The sharemarket resumed its upward march yesterday as corporate earnings encouraged investors to continue moving from cash and bonds to equities.
The benchmark S&P/ASX 200 closed up 0.6 per cent at 5063.4 -- its highest since the worldwide financial crisis intensified with the collapse of Lehman Brothers in September 2008.
Volume swelled to $9.3 billion, although traders said this would have been closer to $4bn if not for options-related activity and heavy dividend trading in Commonwealth Bank and Telstra.
Analysts said market sentiment improved after the index broke through the psychological resistance at 5000 last week.
"Australian sharemarket sentiment has been quite negative for the past two years . . . it's now seeing a significant mood shift in response to an improving economic landscape -- particularly in China," said RBS Morgans investment adviser Christopher Macdonald.
"We are seeing some excellent results coming out of this reporting season, and even average results are being rewarded as money is flowing out of cash and bonds in search of capital growth and higher yields."
IG Markets market strategist Evan Lucas said financial stocks had ongoing momentum following a strong earnings report from the Commonwealth Bank last week.
"The banks are absolutely driving this market," he said.
Among the major banks, ANZ rose 73c to $28.50, National Australia Bank gained 64c to $30.15 and Westpac jumped $1.05 to $30.20. Commonwealth Bank bucked the trend, falling $1.25 to $65.78.
Bendigo and Adelaide Bank was up 32c at $10.17 after saying interest rates on deposit accounts may be about to fall as other sources of funds become cheaper and more accessible for banks.
Steelmaker BlueScope soared 58c, or 15.38 per cent, to $4.35 on news that its first-half loss had narrowed.
Pacific Brands firmed 2.5c to 75.5c after the struggling clothing retailer said it had returned to profitability.
Drilling company Boart Longyear dropped 17.5c, or 8.18 per cent, to $1.965 after it said it expected the downturn in operating revenue to continue.
Goldminers fell, with Newcrest down 5.4 per cent after spot gold dived 1.6 per cent to $US1609.50.
Construction giant Lend Lease fell 27c to $10.42 as it reported a 39 per cent profit jump.
Packaging giant Amcor climbed 23c to $9.14 as it lifted its first-half profit by 16 per cent and said it would cut about 300 jobs.
Australian 10-year commonwealth government bond yields rose almost four basis points to 3.57 per cent, fuelling continued demand for equities.
"Worldwide central banks are forcing people into risk assets by continuing to pump money and by keeping interest rates low," Mr Macdonald said. "As we get a re-weighting from bonds to equities the sheer size of the bond market is putting a lot of upward pressure on equities."
A concerted shift out of fixed interest and into equities on relative value grounds could push up equity valuations, UBS strategists said.
With about 30 per cent of Australian companies having reported, the number of companies that had beaten expectations was running at a three-year high, said Deutsche Bank strategist Tim Baker. He noted companies were also surprising the market with higher-than-expected dividends.
