Central banks take credit for market’s record result

AUSTRALIA’S All Ordinaries index has closed at a record high, finally passing the peak it struck on the eve of the global financial crisis more than a decade ago.

The All Ords, which broadly tracks the country’s 500 biggest listed companies, gained 0.7 per cent or 49.9 points yesterday to close at 6862.4 points — an all-time high.

That is above the previous peak of 6853.6 points it hit on November 1, 2007, before the global financial crisis savaged international markets.

Australia’s benchmark share index, the ASX 200, climbed 52 points to 6776.7 points yesterday but still remains about 50 points, or 1 per cent, below its all-time high of 6828.7 points, also reached on November 1, 2007.

Australian shares rallied yesterday after a strong session on Wall Street overnight on Tuesday, where investors were buoyed by a positive earnings update from corporate titan Coca-Cola and renewed optimism around a breakthrough in the trade stand-off between the US and China. The ASX 200 has rallied 20 per cent this year while equity markets in the US, Europe and Asia are also higher.

InvestSmart chief market strategist Evan Lucas said the main driver of the surge was central banks around the world cutting interest rates, or preparing to do so, in a bid to spur economic growth. Lower interest rates make stocks increasingly attractive as the returns from fixed-interest investments such as term deposits wither.

“It’s all off the back of that fact that central banks are stimulating their economies — they are either doing it or about to do it,” Mr Lucas said.

“Price is being pushed up by central bank stimulus.”