Aussie market records one-year high

SYDNEY- The Australian sharemarket rallied to close at a one-year high on Thursday, as strong earnings from US investment bank JP Morgan encouraged investors that company profits are likely to improve.

But the market fell back from earlier highs as some investors judged it a good price to sell stocks, and as comments from Reserve Bank of Australia governor Glenn Stevens suggested further rate rises would come sooner rather than later.

The benchmark S&P/ASX200 index closed up 28.8 points, or 0.6 per cent, at 4,859.9, the highest since late September 2008, while the broader All Ordinaries added 28.5 points, or 0.59 per cent, to 4,862.5.

On the Sydney Futures Exchange, the December share price index contract was 35 points higher at 4,872 at 1614 AEDT, on a volume of 19,931 contracts.

"The market went up on the JP Morgan result and we've got other big bank results over the next few days," Cameron Securities client adviser Adrian Leppinus said.

"The pull-back was on a bit of profit taking more than anything else."

The comments from Mr Stevens reminded investors that "interest rates aren't going down and are only going up".

Most of the big four banks benefitted, with Westpac adding 30 cents, or 1.12 per cent, to $27.10, Commonwealth Bank gaining 55 cents to $55.52 and ANZ up 11 cents at $24.91.

But National Australia Bank declined 17 cents, or 0.53 per cent, to $31.75 after saying it would abolish monthly account service fees on two of its everyday banking accounts from January 2010 and scrap its $25 over-limit fee on all credit cards.

Bank of Queensland gained 27 cents, or 2.19 per cent, to $12.60 after increasing full-year cash profit 21 per cent and making positive comments on its growth outlook.

JP Morgan, the first major US bank to report third quarter earnings, beat expectations, reporting a profit of US$3.59 billion (A$3.95 billion) for the July-September period.

That helped the Dow Jones Industrial Average, the Nasdaq composite and the broad-market Standard & Poor's 500 index to rise over one per cent.

Separately on Thursday, an upbeat Mr Stevens said the period of greatest weakness in Australia was "probably past" and the risks of really serious economic weakness had "abated".

As the economy gradually expanded, the central bank governor said monetary policy needed to be "recalibrated" to reflect the changing circumstances.

Also supporting the market were the miners and energy stocks.

Matt Lewis, senior dealer with CMC Markets, said increasing base metal prices and oil rising past US$75 per barrel boosted local miners and energy producers.

BHP Billiton gained 50 cents, or 1.3 per cent, to $38.90 and rival Rio Tinto added $1.54, or 2.43 per cent, to $64.79.

The two miners announced changes to a planned US$116 billion (A$126.87 billion) merger of Pilbara iron ore assets after the market closed.

In a move possibly aimed at appeasing regulators, the mining companies said they would be scrapping plans to jointly market up to 15 per cent of production from their operations in Western Australia's Pilbara region.

Oil Search jumped 11 cents, or 1.64 per cent, to $6.80, Santos gained 18 cents, or 1.17 per cent, to $15.54 and Woodside Petroleum advanced 57 cents, or 1.08 per cent, to $53.20.

Gold stocks fell, however, as the gold price also fell.

At 1630 AEDT, the spot price of gold in Sydney was US$1064.00, down US$4.87 on Wednesday's closing price of US$1068.87.

Lihir Gold dropped 11 cents, or 3.3 per cent, to $3.22 and Newcrest Mining fell 48 cents, or 1.29 per cent, to $36.62.

Other stocks to drag on the market were Telstra, falling three cents to $3.13, and Wesfarmers, declining 58 cents, or 2.16 per cent, to $26.32.

Most of the other retailers gained, with Woolworths adding 52 cents, or 1.78 per cent, to $29.75, Harvey Norman rising 12 cents, or 2.59 per cent, to $4.76 and JB Hi-Fi jumping $1.08, or 5.56 per cent, to $20.50 as six analysts upgraded the stock, according to Mr Lewis.

JB Hi-Fi on Wednesday delivered an 8.4 per cent jump in September quarter comparable store sales and said it would lift its 2010 target new store openings to 22.

Other cyclical stocks also did well, with the increased optimism of economic growth.

Boral gained 29 cents, or 4.78 per cent, to $6.36, James Hardie rose 35 cents, or 4.52 per cent, to $8.09, Reece Australia added 90 cents, or 3.9 per cent, to $24 and Virgin Blue increased two cents, or 4.08 per cent, to 51 cents.

In other news, Suncorp-Metway sold real estate business Hooker Corporation to the grandson of its founder for $67 million. Suncorp declined six cents, or 0.65 per cent, to $9.15.

Miner OZ Minerals scaled back its full year production forecast for copper, after its third quarter was hampered by blast misfires and unplanned shutdowns.

The stock added one cent to $1.32.

Infrastructure and engineering company Downer EDI said it had made significant progress in improving the business and reiterated earnings guidance for the 2010 financial year.

Downer EDI rose 17 cents, or 1.9 per cent, to $9.10.

Focus Minerals was the most traded stock by volume, with 113.7 million shares worth $6.41 million changing hands.

Focus stock lost 0.3 cents to 5.4 cents.

Total market turnover was 3.69 billion shares worth $5.79 billion, with 653 stocks up, 507 down and 350 steady.

- AAP