Australia Shares Cling to Five-Year High Ahead of Fed Meeting

   By Robb M. Stewart 
 

MELBOURNE, Australia--Australian shares nudged to fresh five-year highs Tuesday, shrugging off neutral comments from the central bank and remaining cautious in anticipation of the Federal Reserve's policy meeting and word on the timing and scale of its withdrawal of economic stimulus.

"Nerves have kicked in," said Stan Shamu, a market strategist at IG in Melbourne, adding investors aren't willing to keep pushing the market higher while macroeconomic questions remain.

The benchmark S&P/ASX 200 ended just 3.2 points higher at 5251.2, failing to match Monday's multiyear intraday peak of 5266.1. Banks led the gains, supported by the telecommunications sector, and offset declines in mining and energy shares.

The local currency fell against the U.S. dollar after the Reserve Bank of Australia left the door open to further rate cuts, declining to either say a move was imminent or rule out another cut. The RBA has cut eight times since late 2011 and at its last meeting left its key rate on hold at a record low 2.5%.

Stocks and currencies across Asia gained Monday after Lawrence Summers pulled out of the race to replace Ben Bernanke as the next chairman of the Fed, leaving a more dovish Janet Yellen the frontrunner.

"The continued fervour amongst the local bourse will largely be dependent on the next 36 hours," said Betty Lam, a sales trader at CMC Markets. "Investors worldwide will be watching and waiting with bated breath for an indication as to what the [Fed's] tapering schedule and amount may be."

The market was held up by the big banks, with National Australia Bank up 1.7%, ANZ Banking 1.5% higher and Westpac ahead 1.1%.

BHP Billiton and Rio Tinto both closed in the red, down 0.4% and 1% respectively as the price for iron ore continued to decline. Fortescue Metals Group, however, climbed 0.9% after chipping away at its debt burden with plans to redeem preference shares worth A$140 million.

Coal miner New Hope fell 6.8% after reporting its full-year profit had fallen by more than half.

Newcrest Mining dropped 2.3% as gold mining shares lost ground with a fall in the price of the precious metal. Gold is one of most sensitive assets to dollar movements and IG's Mr. Shamu said it will therefore be in focus leading up to the Fed's meeting.

Write to Robb M. Stewart at [e-mail]

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