By Robb M. Stewart
MELBOURNE, Australia--Australian shares climbed to a fresh
five-year high Monday, swept along with higher markets across Asia
as investor worries about a faster withdrawal of economic stimulus
in the U.S. were soothed with the withdrawal of Larry Summers from
the race for Federal Reserve chairman.
Many investors had expected Mr. Summers, a former Treasury
secretary widely believed to be President Barack Obama's first
choice to replace Ben Bernanke, was more likely than other
candidates to curtail the Fed's aggressive moves to stimulate the
economy. That leaves Fed Vice Chairman Janet Yellen among the
frontrunners for the position, raising the prospect of continuity
with Mr. Bernanke's policies.
Sentiment was further bolstered by a deal between the U.S. and
Russia on Syria over the weekend that helped ease fears over a
potential military conflict in the Middle East.
The S&P/ASX 200 ended 0.5% higher at 5248, the highest level
for the benchmark index in more than five years and building on
last week's gains that followed a decisive election win for
Australia's conservative Liberal-National coalition. The index hit
an intraday high of 5266.1.
"One by one the macro issues holding the bulls back are being
priced out," said Chris Weston, chief market strategist at IG in
Melbourne, adding the biggest driver of sentiment on the day was
the prospect of a "market-friendly outcome" for the Fed chairman's
role.
The local currency rallied to a three-month high as the U.S.
dollar weakened on news of Mr. Summers's withdrawal.
This week's Fed policy meeting and the possibility it will mark
the start of tapering in the central bank's asset purchases will
again come into the focus for the market as it digests Mr.
Summers's decision. Australia's central bank also will be watched
closely Tuesday when it releases the minutes of its Sept. 3 policy
meeting, when it left the key interest rate steady at a record low
of 2.5%.
"The minutes will again highlight that the domestic economy
continues to run below trend and that the inflation outlook is
consistent with the target," National Australia Bank said in a
research report, adding it still expects to see a further cut to
rates this year.
Cyclical stocks such as the miners were among the day's biggest
gainers, with market heavyweight BHP Billiton up 0.2% and rival Rio
Tinto up 0.5%. Newcrest Mining rallied 5.1% as the market price of
gold climbed during the day.
The country's big retail banks also gained, with Commonwealth
Bank up 0.3% and National Australia Bank climbing 1.7%. The shares
of the four biggest banks have climbed an average of about 30%
since the start of the year.
Westfield Group advanced 1.1% after saying it was selling seven
shopping malls in the U.S. for a combined US$1.64 billion.
Write to Robb M. Stewart at robb.stewart@wsj.com
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