ASX 200 gains 0.5 per cent and tests the index’s record

Local stocks kicked off the new year on a positive note, almost hitting a record high after an exeptionally strong two months.

Australia’s stock market is on the cusp of record highs after a strong start to 2024.

The S&P/ASX 200 index finished up 0.5 per cent at 7627.8 points on Tuesday, after trading as high as 7632.7 points during the day, despite a 0.3 per cent fall in the S&P 500 on Friday.

It was only about one point away from hitting its record daily closing high of 7628.9 points, and intraday was just below its all-time record high of 7632.8 points, both reached in August 2021.

“It looks like we’ll have to wait another day or two to see it breached, but given the market’s mindset right now, I can guarantee we’ll see it before this week is out,” said Bell Potter’s head of institutional sales and trading, Richard Coppleson.

S&P 500 futures were up about 0.2 per cent when the Australian market closed.

All industry groups except for the property sector rose.

Gains were led by the energy sector, where Woodside Energy rose 1.3 per cent to $31.45.

It came as Brent crude oil futures rose 1.8 per cent to $US78.44 a barrel after Iran sent a warship to the Red Sea after the US Navy sank three Houthi boats at the weekend, adding to regional tensions that has led some ships to avoid the key waterway.

The financials sector also outperformed the S&P/ASX 200 index, with CBA up 1.6 per cent to a fresh record high of $113.61. Record highs were also achieved by Boral, Car Group, Boral Fortescue, Champion Iron, Data#3, Lycopodium, REA Group, Ridley Corp, Seven Group, Stanmore Resources, Super Retail, Supply Network, Viva Energy and Ventia Services.

“The moves in the market over the last three weeks and the very high value show underlying strength below the surface and why the market will remain strong into early January,” Mr Coppleson said.

Fortescue Metals rose 1.3 per cent as Singapore iron ore futures rose 1.8 per cent to a 21-month high of $142.55 a tonne.

The property sector fell 0.7 per cent with Goodman Group down 0.8 per cent to $25.11.

China’s stock market struggled despite a constructive speech by President Xi Jinping over the weekend. Mr Xi said China will “consolidate and strengthen the momentum of economic recovery, and work to achieve steady and long-term economic development”.

IG head of research Chris Weston said it seemed like a meaningful development.

“With China property sales down 34 per cent on-year, and weaker than expected PMI data over the weekend, it feels like we’re moving to a firmer regime of bad news being good news for Chinese markets.”

The Australian stock market is forecast to climb for a second consecutive year in 2024, although at a slower pace as investors face a bumpy ride.

It came after all three US stock indexes closed in the red on the last day of trade for 2023.

But the the S&P 500 finished the year up 24 per cent, just 0.6 per cent short of its January 2022 record. A mania surrounding artificial intelligence and big technology stocks sent the Nasdaq Composite soaring 43 per cent – its best year since 2020.

The benchmark 10-year Treasury yield settled at 3.86 per cent, near where it started the year, but down from a peak of 5.02 per cent in October.

The gains defied the impact of higher interest rates, a regional banking crisis, and wars in Ukraine and the Middle East and their impact on oil prices.

The S&P 500’s biggest winner in 2023 was chipmaker Nvidia, which catapulted 239 per cent in 2023. Meta recorded a 194 per cent jump for the year.

Broker Capital.com’s senior financial market analyst Kyle Rodda said last year’s widespread scepticism proved to be misplaced.

“With the new year underway, the markets are buoyed by expectations for global rate cuts, with futures pointing to about six in the US this year,” Mr Rodda said.

“As always, there are many unanswered questions about the path forward for growth and inflation, especially the recession prospects and subsequent policy responses. There is also the unanswered China question, simmering global geopolitical tensions, and a likely fractious US political environment heading into a presidential election.

“These are the foundation stones of the proverbial wall of worry investors must climb.”