Festive cheer for ASX
US-China trade progress fuels ‘Santa rally’
LITTLE more than a week before Christmas, the Australian share market has staged a robust “Santa rally”, chalking up its best session since the federal election in May.
Fuelled by renewed optimism about the global trade outlook and expectations the lacklustre federal Budget may culminate in more economic stimulus, the benchmark ASX 200 jumped 1.6 per cent yesterday.
It was the biggest singlesession spike since late May and added $33 billion to the value of the nation’s 200 largest listed companies.
The rally came after China and the US agreed to a trade deal over the weekend – albeit one that is pared back from earlier expectations in terms of its scale and is yet to be signed.
Fu Linghui, a spokesman at China’s National Bureau of
Statistics, said the partial trade deal with the US had “reduced market uncertainty”.
Officials in Beijing also released statistics yesterday indicating China had enjoyed a better-than-expected pick-up in the key retail and industrial sectors last month, adding to the upbeat sentiment.
It comes at the end of a tough year for the world’s second-biggest economy, which is expanding at its weakest rate for three decades as it is buffeted by the long-running trade war with Washington as well as a slowdown in global demand for its goods.
At home, Westpac chief economist Bill Evans said the government’s downbeat economic forecasts, issued with its Budget update yesterday, showed the need for extra stimulus.
The government cut its forecast for GDP growth over the year to next June from 2.75 per cent to 2.25 per cent.
Weaker wages and commodity forecasts account for much of the difference.
“There are upside risks to the commodity price forecasts but we can understand why the government would be cautious around these forecasts … wanting to avoid a further fiscal downgrade when the 2020 Budget is announced on May 12,” Mr Evans said.
Given “the disappointing outlook for the economy … it is reasonable to expect that as we move towards the May Budget the government will recognise the need to use fiscal policy to boost demand at the possible expense of sustained budget surpluses,” he said.