Another rally in CBA shares coupled with a strong day for Fortescue Metals sparked an intraday turnaround in the Australian sharemarket, which ended higher for a sixth straight session.
The local market began the day 0.4 per cent lower, after Wall Street had reacted negatively to a drop in the oil price and the US Federal Reserve's assessment of the US economy.
But the local market quickly turned around, with the All Ordinaries closing 0.3 per cent higher at 5532.30 while the ASX200 lifted 0.3 per cent to 5569.50.
"It's not too bad today given the fall in the US," said Alistair McCorquodale, senior client adviser at Morgans. "We're just seeing a little bit of softness in oil-related stocks with the fall in the oil price overnight.
"But the overall market is holding up well. The banks are all strong, even Rio Tinto's holding ground well.
"There's a belief that interest rates will fall and with that belief, people will continue to move to hold companies that provide strong, sustainable dividends – Telstra, the banks, Wesfarmers, Woolworths."
Commonwealth Bank's rally is showing no signs of running out of gas, with the stock adding as much as 1.5 per cent in intraday trade to push above $89 for the first time. The bank's shares have posted gains for seven straight sessions, adding nearly 7 per cent over that period and lifting Commonwealth Bank's market cap close to $145 billion. Commonwealth Bank finished the day 1.2 per cent higher at $88.76.
Among the other banks, Westpac dragged on the market early as it fell 0.6 per cent on news it would sell operations in the Pacific islands. It recovered, however, to dip only 0.1 per cent and close at $34.64.
National Australia Bank jumped 0.85 per cent to $35.50 and ANZ added 0.95 per cent to $32.95.
Markets now imply a 50-50 chance that the RBA will cut its 2.5 per cent cash rate by a quarter of a point when it meets next Tuesday.
"As a small and open economy, highly leveraged to the global growth and commodity cycles, there are good reasons that RBA cash moves generally in the same direction as global rates," said Su-Lin Ong, a senior economist at RBC Capital Markets.
"Risk-reward is shifting against staying on the sidelines," added Ong, who is now tipping two cuts this year.
The sea change in the market began when a well-known RBA watcher in the media wrote that a rate cut next week was almost certain, though he cited no sources for his prediction.
The RBA last cut rates in August 2013, but with so many other central banks on the move it is under mounting pressure to follow suit – if only to stop the local dollar from rising against their currencies.
Mid-cap oil and gas player Beach Energy shed 3.2 per cent to 90¢ on news it would cut its capex budget for the half-year by up to 20 per cent, or $55 million. It also advised that some projects would be delayed as it tightens its belt in the wake of the plummeting crude oil price.
Fortescue Metals rocketed 9.3 per cent to $2.23 after beating analyst expectations for iron ore exports in the December quarter. The miner lowered its cost guidance for the full year by 9 per cent while maintaining its full-year production and shipping guidance. Fortescue also believes it will escape asset write-downs at its half-year financial results next month.
Copper miner PanAust strengthened 4.96 per cent to $1.27 after beating analyst expectations for the December quarter and exceeding its own full-year guidance. However, PanAust indicated the carrying values of some assets would have to be revisited on the back of the 24 per cent decline in the copper price over the past year.
Woodside Petroleum tumbled 1.78 per cent to $33.74 after it and its partners were accused of holding back natural gas shipments to China as a negotiating tactic to raise the price of a contract guaranteeing 25 years of cheap energy. The $25 billion contract, signed in 2002, contained no clause to raise the historically low price.
Bell Potter Securities has initiated coverage on action sports retailer SurfStitch with a "buy" rating and $1.30 price target.
Shares in Australia's largest online retailer SurfStitch gained 5.10 per cent to $1.03 after Bell Potter Securities gave the stock a buy rating and a $1.30 price target. Surfstitch has been trading on par with its issue price of $1 after consistently fetching below that since listing in December.
Analyst Sam Byrnes expects SurfStitch to deliver compound annual revenue growth of 33 per cent over the next three years, with improving gross margins.
Orica lost 2.46 per cent to $17.82 after chairman Russell Caplan raised expectations at the company's AGM that the mining explosives giant intends to pursue capital management. There was no short-term relief in sight for Orica's struggling mining customers, Mr Caplan said.
