By Robb M. Stewart
MELBOURNE, Australia--Australian equities surged to fresh
multiyear highs Thursday, swept along with rallies across the
region after the Federal Reserve's surprise decision to stick with
its stimulus measures.
Shares had been treading water ahead of the Fed's policy meeting
as investors prepared for the central bank to possibly begin
tightening its quantitative easing program, but instead the Fed
elected not to pull back on a US$85 billion monthly bond-buying
program.
"The Fed pulled the rug out from market expectation worldwide
this morning and investors are lapping it all up," said Betty Lam,
a sales trader at CMC Markets in Sydney. "Investors have taken the
opportunity to buy back in with surprisingly strong momentum for
what was conclusively not such great news for the U.S.
economy."
Gains in markets across Asia added to the overnight reaction on
Wall Street where the Dow Jones Industrial Average ended at a
record high and Treasurys posted their biggest one-day price rally
since November 2011. The Fed's continued support of economic growth
also buoyed commodity prices, sending oil and gold in particular
higher.
The S&P/ASX 200 climbed 1.1% to 5295.5, the highest close
for the benchmark index in more than five years although shy of the
5300.1 level touched during the day. Gains were broad based, led by
the mining and energy sectors.
Shane Oliver, head of investment strategy at AMP Capital, said
the Fed's quantitative easing is set to continue providing a boost
to shares going into next year even through it is likely to begin
tapering its stimulus some time in the next six months.
"Underperforming cyclical stocks, such as resources, may
ultimately be more attractive as they offer better value and will
benefit as the global and Australian economies pick up," Mr. Oliver
said.
The Australian currency surged to its highest level in three
months as the U.S. dollar fell on the Fed's decision to maintain
its stimulus. Sustained gains in the local currency could put
pressure on the Reserve Bank of Australia, which has already
expressed concerns about the currency's dampening effect on
economic growth, and would heighten the odds of further rate
cuts.
BHP Billiton helped lead a charge by mining shares, closing up
1.6% while rival Rio Tinto climbed 3.1% and iron-ore producer
Fortescue Metals gained 2.5%.
The rise in the price of gold supported miners of the metal,
with Newcrest Mining up 7.9% and smaller Alacer Gold and Kingsgate
up 17% and 16% respectively.
Banks were also higher, with ANZ, National Australia Bank and
Westpac up between 1.1% and 1.9%.
Billabong rose 5.6% after the struggling surfwear retailer
accepted a rival funding package from investors Centerbridge
Partners and Oaktree Capital Management.
"Continued market momentum will be dependent on flash
manufacturing readings out of China early next week. An additional
recovery story for the world's second-largest economy could
potentially see maintained market interest," CMC's Ms. Lam
said.
Write to Robb M. Stewart at robb.stewart@wsj.com
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