Commodity-based shares soared and the Australian market had its best session in almost two months as investors anticipate more economic stimulus in the US, and inflation, following the Democrats’ key US Senate victory.
The S&P/ASX200 benchmark index closed higher by 104.9 points, or 1.59 per cent, to 6712 on Thursday.
The gain was the best for the index since the 1.72 per cent rise of November 11.
The All Ordinaries closed better by 99.1 points, or 1.44 per cent, at 6980.5.
The energy and materials sectors rose by more than four per cent. The big miners, BHP, Fortescue and Rio Tinto, all set share price records.
Financials also did well and rose 2.42 per cent.
The main catalyst for the market’s climb, and Wall Street’s earlier rise, was the Democrats claiming the final two Senate seats in Georgia.
The result should give the Democrats the balance of power in Congress, and help President-elect Joe Biden implement policies such as greater government spending and higher taxes for some.
Deep Data Analytics chief executive Mathan Somasundaram said investors expected more stimulus payments for most Americans, and were conscious of the effect.
“The payments will put more money in people’s pockets,” he said.
“As people have more money and spend more, that’s how you create inflation.”
This spending would likely lead to higher prices, which had consequences for the ASX.
“The assumption is, as end products go up in price, so will raw materials,” Mr Somasundaram said.
“And the raw materials are in materials and energy stocks.”
Rio Tinto hit a record $126.18 and closed up 8.56 per cent to $125.66.
BHP reached a record $47.04, then closed better by 6.08 per cent to $46.90.
Fortescue’s fourth consecutive share price record was $26.15. It closed higher by 3.47 per cent to $25.92.
The records were also helped by continued gains in the iron ore price. This rose to $US165.5 per tonne (China Port) overnight.
In energy, Santos surged by 7.42 per cent to $6.95. Oil Search had a 6.94 per cent rise to $4.16.
Providers of alternative forms of energy had the biggest gains on the ASX.
New Zealand renewable energy provider Contact Energy had the biggest rise, 12.31 per cent to $10.40.
Galaxy Resources, which produces lithium that can be used for batteries in electric cars, rose 9.13 per cent to $2.87.
The Democrats favour alternative forms of energy and investors expect support for the industry.
ASX investors seemed unaffected by the chaotic scenes at the US Capitol building, which Trump supporters stormed in order to stop politicians certifying Mr Biden’s November election win.
In banking, ANZ increased by 3.78 per cent to $23.64, the Commonwealth climbed 2.03 per cent to $84.58, NAB rose 2.81 per cent to $23.04 and Westpac improved by 3.2 per cent to $19.99.
Information technology was the sector which lost most. It dropped 2.95 per cent.
On the local front, Australians will start being vaccinated against coronavirus in February, following advice provided to the federal government.
Prime Minister Scott Morrison said the Therapeutic Goods Administration was expected to receive all of the data it needed from vaccine developer Pfizer this month, with approval due by the end of January.
The Aussie dollar was buying 77.82 US cents at 1725 AEDT, higher from 77.73 US cents at the close of trade on Wednesday.
ON THE ASX
* The S&P/ASX200 benchmark index closed higher by 104.9 points, or 1.59 per cent, to 6712 on Thursday.
* The All Ordinaries closed better by 99.1 points, or 1.44 per cent, at 6980.5.
* At 1725 AEDT, the SPI200 futures was up 13 points, or 0.2 per cent, to 6664 points.
One Australian dollar buys:
* 77.82 US cents, from 77.73 cents on Wednesday
* 80.34 Japanese yen, from 79.94 yen
* 63.21 Euro cents, from 63.24 cents
* 57.28 British pence, from 57.11 pence
* 106.94 NZ cents, from 107.00 cents.