SYDNEY: Australian shares closed higher on Friday to log their third consecutive weekly gain, led by index heavyweights financials and miners, as US Federal Reserve’s rate cut and less-hawkish-than-anticipated outlook improved sentiment.
The S&P/ASX 200 index closed 1.2 percent higher at nearly one-month’s high of 8,697.3 points. The benchmark added 0.7 percent in its third consecutive weekly rise, its longest winning streak since late-August.
Fed’s commentary was mostly friendly for risk assets and the positive global lead has offset the negative impact from the Reserve Bank of Australia’s hawkish guidance, Shane Oliver, chief economist and head of investment strategy at AMP, said in a note.
Earlier this week, the RBA ruled out further policy easing and signalled the possibility of a rate hike if inflation persists. Swaps now imply a 23 percent chance of a 25-basis-point rate hike at the central bank’s next meeting in February.
Meanwhile, its US counterpart cut key rates by a quarter-basis point, fuelling a global rally that carried over to the Australian market.
The rising trend in shares remains in place as supported by global growth, the Fed keeping the door open for further cuts, and improving Australian earnings, AMP’s Oliver said, adding that the “Santa rally in shares normally kicks in from around now.”
Financials rose 1.6 percent in the session and gained 1.7 percent for the week, their best performance since late September. The sub-index had dropped 7.4 percent last month amid a sell-off driven by valuation concerns and margin pressures.
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