Markets wrap: Investors embrace ‘January effect’ as ASX hits four-month high

Investors rode a wave of optimism in the first session of 2022 as the ASX 200 added a whopping 2 per cent to close near record highs.

Investors took the Australian sharemarket to within a whisker of its all-time high in a roaring start to the trading year, with all sectors firing as the “January effect” took hold.

Blue-chip favourites, energy companies and firms adjacent to electric vehicles fired the ASX 200 to a gain of 145.2 points, or 1.95 per cent, with the close of 7589.8 points the second highest finish on record.

It was also the strongest year-opening session in the two-decade history of the local benchmark, topping the 1.5 per cent gain registered on the first trading day of 2021 and the 1.7 per cent gain on January 2, 2001.

The benchmark ASX 200 index is now within a whisker of retaking the record high set on August 16. Picture: NCA NewsWire / James Gourley

The benchmark ASX 200 index is now within a whisker of retaking the record high set on August 16, before Delta lockdowns and inflation fears sapped investor momentum.

The All Ordinaries finished 147.6 points, or 1.9 per cent, higher at 7926.8, while the Aussie dollar eased slightly to 72.12 US cents.

Strong gains from the major banks, iron ore giants, energy firms, and retail conglomerates powered the market higher on Tuesday and continued a recent equity market surge that has defied the rapid spread of the Omicron variant.

A solid lead from Wall Street also helped, with tech and gadget behemoth Apple surpassing a $US3 trillion valuation and Elon Musk’s Tesla surging on strong electric vehicle production figures.

Tribeca Alpha Plus find manager Jun Bei Liu said local investors were clearly confident the economy would not be derailed by the renewed spread of the virus.

She also said a traditionally buoyant January mood had attracted people back to the table after derisking for the Christmas and new year break.

January is usually a positive month. Picture: NCA NewsWire/ Gaye Gerard

“There’s a lot of strength coming back to the market, a lot of optimism going into the new year,” Ms Liu said.

“It’s the January effect – usually a very positive month. We’re also seeing that Omicron appears to be more infectious but less deadly, and if you look over the past year, we have really pushed through every new variant to record highs.”

Investment giant Macquarie Bank hit new record highs when it closed 2.9 per cent ahead at $211.34, outpacing the sector’s Big Four players.

Commonwealth Bank added 1.5 per cent to $102.51, NAB rose 1.9 per cent to $29.40, Westpac gained 1.5 per cent to $21.66, and ANZ finished 1.8 per cent higher at $28.

Iron ore titan BHP rose 2.1 per cent to $42.38 and Fortescue Metals added 3.3 per cent to $19.85, although Rio Tinto was a rare decliner at the top end of the market, dropping 0.4 per cent to $99.69.

It was the strongest year-opening session in the two-decade history of the local benchmark. Picture: NCA NewsWire/ Gaye Gerard

Openmarkets chief executive Ivan Tchourilov said iron ore prices being sustained above $US120 per tonne had offered support for the material sector, while demand forecasts increased over December after Chinese steel mills had excess production quotas and could increase output.

Mr Tchourilov also noted lithium players were again strong after record quarterly electric vehicle production and deliveries for Tesla.

Pilbara Minerals gained 10 per cent to $3.52, Allkem rose 7.7 per cent to $11.20, Mineral Resources was up 4.8 per cent to $58.68, and Vulcan Energy climbed 4.2 per cent to $10.84.

Liontown Resources also rose – adding 5.1 per ent to $1.745 – while lithium technology company Novonix was the best performer on the index, gaining 14.5 per cent to $10.52.

Lynas Rare Earths finished 8.5 per cent ahead at $11.03.

Gold prospectors were soft as the yellow metal slipped but coalminers gained solidly. Whitehaven Coal rose 5.8 per cent to $2.76 and new Hope added 4 per cent to $2.32.

Energy firms tracked higher oil prices, supported by tight supply and hopes demand will continue to recover even with OPEC+ likely to agree to further increases in output.

Originally published as Markets wrap: Investors embrace ‘January effect’ as ASX hits four-month high