ASX adds $33bn in best day since May

Shares jumped early and built through the session to hit a high of 6866.1 before easing at the close.

Shares jumped early and built through the session to hit a high of 6866.1 before easing at the close. Picture: AAP

Australian shares kicked off the week with their best session since the May election, as shares came within 30 points of last month’s record high.

An 11th-hour trade deal between the US and China was largely behind the $33bn boost, with a Phase One deal now agreed to, but not signed, between the two. China has agreed to buy more from the US, in return for some concessions from the US on tariffs.

Shares jumped early and built through the session to hit a high of 6866.1 in afternoon trading, before easing at the close to finish higher by 110 points, or 1.63 per cent, at 6849.7.

Meanwhile, the All Ords lifted by 108 points, or 1.57 per cent, to 6952.3.

The Australian dollar was 0.04 per cent weaker against the US dollar by the close of the ASX trading session, buying US68.73c.

The government’s Mid-Year Economic Fiscal Outlook added to the market rally, as Treasurer Josh Frydenberg slashed the forecast surplus and warned wages growth would flatline at 2.5 per cent.

That’s adding weight to calls for the RBA to step in sooner, and raising prospects of a rate cut from the central bank in February.

“Though not yet in any sort catastrophic state, the Australian economy is clearly still in quite a soft spot. Growth will probably be well below trend for the most part of the next year, and that’s likely to see the unemployment tick higher slowly as a result,” IG markets analyst Kyle Rodda said.

“Greater stimulus appears necessary from policymakers. The market has priced-in a 50-50 chance of an RBA cut in February.”

The rally was broad based across all sectors, led by heavyweight mining and bank stocks.

A tick higher in iron ore futures helped BHP add 1.6 per cent to $39.99, Rio Tinto lift by 1.2 per cent to $101.78 and Fortescue by 0.8 per cent to $10.81.

In the major banks, Commonwealth Bank led with a 1.75 per cent gain to $81.46, Westpac put on 1.5 per cent to $24.85, ANZ gained 1.4 per cent to $25.05 and NAB added 1.5 per cent to $25.52.

UK banking group Virgin Money surged on the UK election result, leading market gainers with a rise of 8.8 per cent to $4.10.

Elsewhere, healthcare stocks outperformed, led by a 2.5 per cent boost in CSL to $285.10, while Cochlear lifted by 2.9 per cent to $231.62.

Sigma Healthcare lost 9.9 per cent to 59.5c as former suitor API sold out of the stock, and after a downgrade from Credit Suisse that warned of a weaker outlook for the stock.

Woolworths shareholders passed a resolution to spin-off its Endeavour Drinks arm, as the company’s chairman warned the group had discovered more underpayment claims in its businesses. Shares rose by 0.6 per cent to $37.63.

Meanwhile, rival Coles lifted by 0.9 per cent to $15.23.

Qantas lifted by 1.24 per cent to $7.37 despite Jetstar announcing cuts to its flights in January amid a pay dispute with union groups.

Afterpay rival Openpay slipped on its debut, shedding 17 per cent from its IPO price of $1.60.

Meanwhile, Afterpay added 1.95 per cent to $29.26 while Zip Co lifted by 2.27 per cent to $3.60.

Smartgroup came under pressure after warning profit would be lower amid changes by its insurance underwriting partner. Shares finished down 15.2 per cent to $7.58.