The Australian 25/4/2013 – Derek Mumford

Banks lead broad gains driven by inflation data

THE sharemarket surged 1.7 per cent yesterday as banks led broad-based gains following lower-than-expected domestic inflation data and stronger offshore markets.

The benchmark S&P/ASX 200 jumped 86.2 points to 5102.4 points as investors took the view that a low inflation figure for the first quarter of 0.4 per cent would allow the Reserve Bank more room to cut interest rates.

This triggered further strong buying of bank shares, with the big four rising more than 2 per cent to record levels.

CBA jumped $1.69 to $71.70, Westpac 79c to $32.50, NAB added 69c to $32.76 and ANZ closed 65c higher at $29.90.

“The inflation figure means there’s no impediment to the RBA taking further action to stimulate the economy, and it boosts the attractiveness of high-yield shares as bond yields continue to fall,” White Funds Management managing director Angus Gluskie said.

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Lonsec senior client adviser Michael Heffernan said investors also were encouraged initially by good rises in overseas markets.

“All the lights were green, then we got the CPI, and that seems to have set the banks alight, and anything that pays a dividend shot through the roof,” he said.

On an annual basis, headline CPI rose 2.5 per cent, leaving inflation comfortably within the central bank’s 2 per cent-3 per cent target range.

The dollar rose to $US1.0246 from $US1.0233.

Rochford Capital senior consultant Derek Mumford said the currency had dropped following the release of the inflation figures, before regaining some ground during the afternoon.

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