Stocks rally on bank optimism

The local market has closed firmly higher, as the big four banks drove gains.

The Australian sharemarket has surged into a positive close, with the big banks and energy groups enjoying a strong bid to start the week.

At the closing bell, the benchmark S&P/ASX 200 index had rebounded 42.6 points, or 0.78 per cent, to 5,478.5, while the broader All Ordinaries index advanced 39.6 points, or 0.72 per cent, to 5,564.8.

Australia’s big four banks combined to contribute 19 points to the benchmark market’s gains, driven higher by an improvement in sentiment around Germany’s Deutsche Bank as talk surfaced late last week it would face a fine from the US Department of Justice of around half initial expectations.

“Deutsche Bank gained 7.7 per cent on Friday off the news and was a major driver of risk-on sentiment across a range of asset classes,” IG market analyst Angus Nicholson said.

Financials were leading the way in all corners of the globe as the risk of contagion from Deutsche Bank’s troubles was downplayed. Markets in Japan and Hong Kong were both up around 1 per cent amid the global rally.

Locally, volumes were seen among their lowest levels for the year given it was a public holiday in New South Wales, Queensland, ACT and South Australia, with a dearth of news seeing local indices mirror those offshore.

Westpac jumped the most at home, adding 1.8 per cent to $30.05, while Commonwealth Bank climbed 1.5 per cent to $73.455, NAB lifted 0.7 per cent to $28.065 and ANZ rose 1.1 per cent to $27.94.

The energy sector also shone after crude prices continued their march higher in offshore trade at the end of last week, with traders looking beyond lacklustre Asian trade in the commodity.

Santos surged 3 per cent to $3.72, Origin Energy added 1.9 per cent to $5.52, while Woodside bounced 0.9 per cent to $28.89.

In materials, gains were aided by a rise in most base metals, although weakness in iron ore kept Fortescue Metals in check.

BHP bounded 1.7 per cent to $22.77, Rio Tinto rose 0.6 per cent to $51.91 and Fortescue bucked the trend in sliding 1.1 per cent to $4.895.

Copper and gold miner OZ Minerals dipped 1 per cent after warning investors the South Australian power outage put its gold production targets at risk.

Elsewhere, healthcare and industrials were the only two sectors to see red, with investors shunning defensive sectors amid the risk-on attitude.

Among other blue chips, Telstra tacked on 0.2 per cent to $5.19, while Qantas gained 0.6 per cent to $3.14.

Meanwhile, the Australian dollar saw muted trade given the lack of local action and as a weeklong holiday in China also subdued regional dealings. At the close of local trade, it was steady around US76.5c, clinging onto its gains from the latest offshore session.