Market punches through barrier
AUSTRALIAN shares have smashed through the 7000 threshold, setting an all-time high soon after the start of trading yesterday as investors welcomed the signing of a long-awaited trade deal between the US and China.
The benchmark ASX200 gained 47 points to close at a record high of 7041.8 points, eclipsing the previous day’s record of 6996.8 points. The broader All Ordinaries index also rose strongly, closing at 7153.6.
The surge has resulted in the local bourse having its best January in more than 30 years, with gains of just over 5 per cent since the start of 2020.
Australian shares took the lead from the US, where another record result on Wall Street overnight saw the Dow Jones Industrial Index surge past 29,000 points for the first time.
The rise comes after the first phase of a trade agreement between the US and China was signed overnight in the US after two years of tense negotiations.
“The US-China trade deal has potential to boost consumer and business optimism and therefore economic activity,’’ CommSec chief economist Craig James said.
“The ASX 200 breached 7000 points for the first time, in recognition of the better economic prospects. Certainly 7000 is no magic level. But it is the power of the zeros, just like we applaud a cricket player getting 100 runs in an innings, we reflect on the path of the ASX 200 to new highs.’’
All sectors gained ground. Among the ASX 200 companies achieving record highs were Wesfarmers, James Hardie, Premier Investments, Sonic Healthcare, CSL, Cochlear, Aristocrat, Magellan Financial, Breville Group, Domain and Downer.
Technology stocks performed especially well, with investors relieved at trade deal provisions to protect intellectual property rights in China.
Despite the buoyancy, there were a few jitters.
Some analysts worry that, with a record price-to-earnings ratio near 18 times across the ASX 200, there are eerie parallels with bull markets in 2000 and 2007 on the eve of dramatic corrections.
But there are some significant differences this time, chief among them being reduced leverage, meaning a lower risk of forced selling.
THE US-CHINA TRADE DEAL HAS POTENTIAL TO BOOST … OPTIMISM AND THEREFORE ECONOMIC ACTIVITY
CRAIG JAMES