Australia Shares End at New Five-Year High

   By Robb M. Stewart 
 

MELBOURNE, Australia--Australian shares climbed to a fresh five-year high Monday, swept along with higher markets across Asia as investor worries about a faster withdrawal of economic stimulus in the U.S. were soothed with the withdrawal of Larry Summers from the race for Federal Reserve chairman.

Many investors had expected Mr. Summers, a former Treasury secretary widely believed to be President Barack Obama's first choice to replace Ben Bernanke, was more likely than other candidates to curtail the Fed's aggressive moves to stimulate the economy. That leaves Fed Vice Chairman Janet Yellen among the frontrunners for the position, raising the prospect of continuity with Mr. Bernanke's policies.

Sentiment was further bolstered by a deal between the U.S. and Russia on Syria over the weekend that helped ease fears over a potential military conflict in the Middle East.

The S&P/ASX 200 ended 0.5% higher at 5248, the highest level for the benchmark index in more than five years and building on last week's gains that followed a decisive election win for Australia's conservative Liberal-National coalition. The index hit an intraday high of 5266.1.

"One by one the macro issues holding the bulls back are being priced out," said Chris Weston, chief market strategist at IG in Melbourne, adding the biggest driver of sentiment on the day was the prospect of a "market-friendly outcome" for the Fed chairman's role.

The local currency rallied to a three-month high as the U.S. dollar weakened on news of Mr. Summers's withdrawal.

This week's Fed policy meeting and the possibility it will mark the start of tapering in the central bank's asset purchases will again come into the focus for the market as it digests Mr. Summers's decision. Australia's central bank also will be watched closely Tuesday when it releases the minutes of its Sept. 3 policy meeting, when it left the key interest rate steady at a record low of 2.5%.

"The minutes will again highlight that the domestic economy continues to run below trend and that the inflation outlook is consistent with the target," National Australia Bank said in a research report, adding it still expects to see a further cut to rates this year.

Cyclical stocks such as the miners were among the day's biggest gainers, with market heavyweight BHP Billiton up 0.2% and rival Rio Tinto up 0.5%. Newcrest Mining rallied 5.1% as the market price of gold climbed during the day.

The country's big retail banks also gained, with Commonwealth Bank up 0.3% and National Australia Bank climbing 1.7%. The shares of the four biggest banks have climbed an average of about 30% since the start of the year.

Westfield Group advanced 1.1% after saying it was selling seven shopping malls in the U.S. for a combined US$1.64 billion.

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

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