ASX climbs the wall of worry to reach a record high

The Australian share has closed at a new record high as investors react positively to an improving economic backdrop and rumours of a Chinese stimulus package.

The Australian share market closed at a record high on Tuesday led by strong performances in the financial and minerals sectors, with both rising off the back of an improving economic outlook.

The benchmark ASX 200 finished up 65.60 points or 0.79 per cent, higher at a record close of 8,318.40, as investors piled into familiar names including the big four banks and large miners.

The broader All Ordinaries rose 69.10 points, or 0.81 per cent, to 8,598.60. The Aussie dollar is trading around US67.28c.

The banks also saw strong gains during Tuesday’s trading as expectations of lower interest rates, which reduces the risk of the bank’s customers defaulting on their loans.

Iron ore prices also traded upwards on Tuesday, at $106 a tonne, with investors still reacting positively to Chinese stimulus rumours.

Investors took heart from improving economic outlook to help the ASX rise on Tuesday. Picture: Newswire/ Gaye Gerard.

On Tuesday AMP Capital’s chief economist Shane Oliver said it was the norm for markets to reach record highs, as economies and businesses continue to grow.

“You could make an argument that valuations are stretched and there are economic factors to worry about including the US election, the Middle East conflict and a recession in Australia, but I think it is premature to say the bull market is over, even though we reached a record high,” he said.

Mr Oliver also pointed out Australia had not had a bear market since 2020 and has risen 83 per cent from the low point of Covid, but said the current economic backdrop could still support further growth for Australian shares.

“We are getting closer to rate cuts, inflation has come down from its high and the economy is still growing even if Australians have cut back on a per capita basis,” Mr Oliver said.

The Australian market traded strongly off the back of the US markets which saw a strong start to earnings seasons. The S & P 500 rose 0.5 per cent to 5859.85 off the back of expectations that Goldman Sachs, Bank of America, Citigroup, Morgan Stanley and Netflix will all deliver more positive news for shareholders.

Tuesday’s trading saw nine of 11 sectors are higher along with the S&P/ASX 200 Index. Financial is the best performing sector, gaining 1.32 per cent.

Mr Oliver said there was a strong chance the ASX would continue to break record highs going forward.

Despite stretched valuations, Mr Oliver said the markets could continue to rally. Picture: Newswire/ Gaye Gerard.

“As markets keep going higher and higher, there is the increasing risks of a correction or a bear market, but at this stage it is a bit hard to see what is going to drive a bear market,” Mr Oliver said.

“I don’t think investors should be anymore concerned now then they were back in say July when we made record highs.”

Healthcare provider Healius led the gains up 7.25 per cent to $1.85 while the big four banks were all trading strongly. Westpac shares closed 1.6 per cent higher, while ANZ (+0.9 per cent), NAB (+1.5 per cent) and CBA (+1.8 per cent) all helped the ASX close at a record high.

Payments company Tyro slummed 11 per cent to $0.80 off the back of news the government is going to crack down on card surcharges.