Aussie markets on high

MELBOURNE - The Australian share market closed firmer, notching up a fresh 11-month high, advancing on the back of strength in materials and financial stocks and business confidence lifting to a near six-year high.

At 1615 AEST the benchmark S&P/ASX200 index was up 69.4 points, or 1.56 per cent, at 4523.8, while the broader All Ordinaries rose 66.7 points, or 1.5 per cent, to 4527.8.

Both indices finished at their highest level since October 8, 2008.

On the Sydney Futures Exchange, the September share price index contract gained 55 points to 4522 on a volume of 19,241 contracts.

Macquarie Private Wealth associate director Lucinda Chan said the local market's very strong performance was buoyed by an eight index point rise in National Australia Bank's monthly measure of business confidence during August to plus 18 points - the highest level in almost six years.

"That put a lot of pressure on the banks as interest rates are likely to move very shortly," she said.

"But generally it was a very good boost to the market that things are looking pretty rosy here and sentiment is obviously very strong."

Ms Chan said it was likely the All Ordinaries would reach 5200 by the end of calendar 2009 and the Australian dollar to reach US 86 cents soon.

The local currency was trading at 85.61 US cents at 1619 AEST.

"Equity markets are still looking cheap compared to what it's come down from. The question is whether it can maintain its momentum," Ms Chan said.

Major local lenders finished higher, with National Australia Bank jumping $1.03, or 3.77 per cent, to $28.34, ANZ adding 60 cents, or 2.81 per cent, to $21.95, Commonwealth Bank up 94 cents, or 2.05 per cent, to $46.83.

Westpac advanced 41 cents, or 1.7 per cent to $24.54.

Financials, materials, energy and consumer discretionary stocks pushed the market higher, with healthcare stocks losing ground, Ms Chan said.

"Consumer discretionary stocks also didn't do too badly from the Kraft-Cadbury deal overnight, which is making people think of that sector's merger and acquisition capabilities."

Kraft Foods Inc has made a US$16.7 billion (A$19.5 billion) bid for Cadbury Plc overnight, with Cadbury saying the bid fundamentally undervalues the London-based company.

In the materials sector BHP Billiton added 80 cents, or 2.18 per cent, to $37.58, while rival Rio Tinto gained $1.25, or 2.21 per cent, to $57.79.

Major oil stocks were mixed, with Oil Search up seven cents to $6.34, Woodside Petroleum firming $1.00 to $47.82, but Santos was four cents softer at $15.26.

Gold surged through the US$1000 per fine ounce level on the local market for the first time since March 14, 2008 when it closed at US$1001.00 per fine ounce.

The price of spot gold in Sydney on Tuesday reached US$1001.50 per fine ounce by 1622 AEST, up US$7.35 on Monday's local close of US$994.15.

The all-time high of gold on world markets was set on March 17, 2008, when it hit a high of US$1030.80 per ounce.

Local gold miners benefited from the rally, with Newcrest Mining putting on $1.19 to $33.75, Lihir Gold jumping nine cents to $3.09 and dual-listed Newmont Mining up 13 cents at $5.46.

Local retailers were mixed, with giant grocer Woolworths losing seven cents to $28.19, rival Wesfarmers - owners of the Coles group - up 67 cents at $25.42, and Pacific Brands surging six cents to $1.14.

Media stocks were mostly higher, with Fairfax Media gaining five cents to $1.58, News Corporation up 15 cents to $15.32 and News' non-voting scrip firming three cents to $13.18.

Virgin Blue Holdings lost two cents to 34.5 cents, while Qantas Airways added two cents to $2.45.

In news today mining junior Atlas Iron Ltd said it planned to merge with explorer Warwick Resources to help boost exports, reduce costs and create a new iron ore mining force in the West Australian Pilbara.

Atlas' shares gained 10.5 cents, or 6.29 per cent to $1.775 while Warwick's shares surged 10.5 cents or 22.58 per cent to 57 cents.

Elsewhere in the resources sector, iron ore junior FerrAus Ltd said the Chinese government-owned China Railway Materials (CRM) had agreed to take a 12 per cent stake in the company.

FerrAus' shares finished 6.5 cents higher at 60 cents.

Focus Minerals was the top traded stock by volume, with 121.2 million shares changing hands for $3.78 million.

Focus' shares gained 0.1 cents, or 3.23 per cent, to 3.2 cents.

Preliminary national turnover reached 2.94 billion shares worth $5.87 billion, with 720 stocks up, 414 down and 325 steady.

- AAP