ASX climbs above 5000 on Bank of Japan decision

The Australian sharemarket ended a turbulent month on a positive note with the index pushing above 5000 on a surprise move by the Bank of Japan to cut interest rates into negative territory. 

The benchmark S&P/ASX 200 clawed back above 5000 to end near the week's high at 5005.5 points, up 1.8 per cent for the week and 0.6 per cent for the day. The broader All Ordinaries also ended the day up 0.6 per cent and week 1.8 per cent higher to 5056.6 points.

Sending the market ultimately higher on Friday was the decision by the Bank of Japan to cut interest rates to negative ...
Sending the market ultimately higher on Friday was the decision by the Bank of Japan to cut interest rates to negative 0.1 per cent. 

The bourse ended the month 5.5 per cent lower, its worst start to the year since 2010.

The second half of the month was better than the first, with Friday's close bringing two weeks of gains, helped by stimulus talks from central banks. 

The Bank of Japan's decision to cut interest rates to negative 0.1 per cent came a week after European Central Bank president Mario Draghi opened the door to more easing at its March meeting. The US Federal Reserve this week also hinted it would consider the pace of its rate rises as it kept an eye on global volatility.

This promise of stimulus helped relieve some of the bearish sentiment that had gripped investors at the start of the month amid weak Chinese industrial numbers and China's decision to cut the value of its currency again.  


The move by Japan's central bank took the markets completely by surprise, Triple 3 Partners director Simon Ho said. 

"Nobody was expecting them to contemplate negative rates, they were thinking about them for 20 years but they've never done anything about it."

The move helped boost bourses around the region, including the Nikkei which rose almost 2 per cent in afternoon trade, but the "sugar rush" wore off during the afternoon.

"[Japan] has had absolutely no success with their quantitative easing and I'm not sure they're going to have any success with this," Mr Ho said. 

Friday's turmoil was an example of what has been a bumpy start to 2016, Suncorp Bank senior economist Darryl Conroy said. 

"Weakening commodity prices, a slowing Chinese economy and the first US rate hike [have generated] volatility and uncertainty," he said. 

The month saw the index flirting with bear market territory, coming close to a fall of 20 per cent from its recent high of almost 6000 last April. 

The index fell 5.5 per cent for the month, while utilities and telecommunications sub-indices the only ones to record a gain in January, up 1.6 per cent and 2 per cent respectively.

"Materials are once again lagging on the back of the commodity declines down 10 per cent," Mr Conroy noted. 

"As expected energy stocks are down, but have managed to reclaim some intra month losses, on the back of gains to the oil price."

The energy index ended the month down 5.8 per cent, but was the strongest performing index for the week, up 5.3 per cent, well ahead of utilities up 1 per cent.

Oil Search, up 6.6 per cent, Santos up 7.5 per cent, Woodside Petroleum up 6 per cent and Origin Energy up 5.9 per cent were the performers in the sector on Friday. 

Origin Energy climbed after the company said its revenues for the second quarter fell 6 per cent on the falling oil price, but its oil and gas output rose by 14 per cent in the December quarter. 

In the miners, BHP Billiton rose 1.7 per cent to $15.35 and Rio Tinto rose 0.5 per cent to $39.19. Fortescue Metals Group rallied 13.8 per cent to $1.73 after Credit Suisse upgraded the stock from neutral to outperform but kept its $2 price target.

In the banks, National Australia Bank rose 2.1 per cent to $27.66, Commonwealth Bank rose 1.1 per cent to $78.67, Westpac Banking Corporation rose 1.21 per cent to $30.85 and ANZ Banking Group rose 0.6 per cent to $24.18.