Stocks edge higher as trading picks up
The Age
Tuesday January 5, 2010
THE Australian sharemarket continues to make gradual gains as more people return from summer holidays. The S&P/ASX 200 Index yesterday gained 5.7 points, or 0.12 per cent, to close at 4876.3 after reaching an intraday high of 4888.7.This was just 6.6 points below the intraday high of 4895.3 points reached on October 15.The market's strength coincided with the release of preliminary calculations by the Reserve Bank showing a rise of 1.9 per cent in the index of commodity prices last month, following a revised 1.3 per cent increase in November.According to Bourse Communications' investment clock, the Australian economic cycle moved rapidly through the "slowdown" phase between November 2008 and March last year. But it also moved through the recession phase €” when commodity prices, foreign reserves and real estate values traditionally decline €” in a matter of months.The economy is now well into the recovery phase, with the clock hand pointing to 8 o'clock, when commodity and share prices rise, according to managing director Rod North.A full cycle normally took eight to 11 years, Mr North said, and he expects the current cycle to peak again in about 2013.Mr North also believes the Australian All Ordinaries Index could reach 10,000 within four years, driven by better profits from companies that tightened running costs and debt levels during the downturn.But profits depend on a strong global economy, and Credit Suisse equity strategist Damien Boey said it was still too early to tell how well the US stimulus package had worked."If stimulus accounts for all of the recovery we have seen so far, then when you withdraw that stimulus the economy will probably experience a relapse. In which case the sharemarket will fall off," he told BusinessDay.If there were solid signs that the US economy was growing without government help, such as increases in non-farm payroll and Institute for Supply Management data due out this week, then sharemarkets would continue their bull run, Mr Boey said.
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