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(Australian Associated Press)
The Australian share market has smashed through the 7,100 mark, resuming its record-breaking trajectory as some traders were apparently caught in a short squeeze.
The benchmark S&P/ASX200 index finished Wednesday up 66.4 points, or 0.94 per cent, at 7,132.7, while the broader All Ordinaries index closed up 68.5 points, or 0.95 per cent, at 7,249 as the market bounced back from a modest retreat on Tuesday.
“It’s an extraordinary performance from the Australian market,” said CMC Markets chief market strategist Michael McCarthy.
“Given the weak leads from Wall Street, given the concerns over the coronavirus, to be up one per cent is extraordinary.”
The normally defensive sector of consumer staples was the biggest gainer, and safe-haven dividend stocks like utilities underperformed, which Mr McCarthy said pointed to traders who had bet stocks would fall being forced to cover their positions, pushing them higher.
“It looks very much to me like a short squeeze of underweight investors,” he said.
The ASX200 has now gained 6.7 per cent in 2020 – smashing all-time highs in nine of out the 15 trading days this year – and Mr McCarthy said there was still more to come.
“All the price action is pointing upward,” he said.
Fifteen stocks in the ASX200 set all-time highs, including Polynovo (up 11.0 per cent to $2.83), Fortescue Metals (up 5.1 per cent to $12.69), Magellan Financial (up 5.0 per cent to $66.75), Woolworths (up 3.3 per cent to $41.32) and CSL (up 1.4 per cent to $308.50).
Others setting records were Brickworks, Carsales, Chorus, Downer EDI, James Hardie, Resmed, Sonic Healthcare, SCA Property Group, Seek and Steadfast Group.
Polynovo was the biggest ASX200 gainer, followed by A2 Milk (up 5.3 per cent to $15.59), Fortescue, Magellan Financial and then WiseTech Global (up 4.7 per cent to $25).
“There’s no clear investment theme – it’s just a bit of a scramble,” Mr McCarthy said.
All the big banks were up, with Commonwealth up 1.2 per cent to $84.45, ANZ gaining 0.8 per cent to $25.72, Westpac up two cents to $25.14 and NAB up one cent to $25.71.
In the mining sector, BHP rose one cent to $41.21 and Rio Tinto gained 0.9 per cent to $107.38, while goldminers were mostly lower.
Newcrest fell 1.0 per cent, Evolution was down 1.5 per cent, and St Barbara dropped 4.3 per cent after downgrading gold production forecasts for the year.
Travel-related stocks were among the few groups that lost ground, as airports around the world began screening for Chinese coronavirus cases.
Sydney Airport dropped 1.5 per cent, Qantas fell 2.0 per cent, Flight Centre was down 1.9 per cent and Webjet dipped 0.8 per cent.
In addition to Woolies’ record day, Coles was also up 3.0 per cent to $16.62 after German supermarket giant Kaufland scrapped plans to open 20 supermarkets in Australia.
IG market analyst Kyle Robba in Melbourne said the ASX’s global outperformance was being underwritten by expectations that unlike central banks elsewhere, the Reserve Bank of Australia would be forced to cut rates again.
“This is turning what’s a historically unattractive dividend yield for the ASX200 into something worth jumping into equities for, as falling bond yields boost considerably equities’ relative yield appeal,” he wrote in a note.
The market on Tuesday was pricing in a 53 per cent chance of a rate cut to 0.5 per cent in February, according to the ASX’s RBA Rate Indicator.
The Australian dollar meanwhile buying 68.41 cents, down from 68.87 cents at Tuesday’s close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished up 66.4 points, or 0.94 per cent, at 7,132.7 points.
* The All Ordinaries was closed up 68.5 points, or 0.95 per cent, at 7,249 points.
* At 1720 AEDT, the SPI200 futures index was up five points, or 0.07 per cent, at 7,081 points.
CURRENCY SNAPSHOT AT 1630 AEDT:
One Australian dollar buys:
* 68.41 US cents, from 68.61 US cents on Tuesday
* 75.28 Japanese yen, from 75.44 yen
* 61.71 euro cents, from 61.84 cents
* 52.41 British pence, from 52.72 pence
* 103.77 NZ cents, from 103.93 cents