Better-than expected economic news powered Wednesday’s rise.
Confirmation of a 0.3 per cent March quarter GDP decline ended almost 30 years of continuous expansion, and almost certainly sets the nation up for a technical recession when COVID-blighted figures are announced in September.
The result was, however not as bad as the 0.4 per cent drop that was expected.
The glint of a silver lining clearly caught the eyes of economists and investors.
“Of course next quarter will see the real drops, but the March quarter figures were slightly better than expected and give some optimism that maybe the next set won’t be quite as grim as predicted,” said KPMG economist Dr Brendan Rynne.
JP Morgan Asset Management strategist Kerry Craig said the general view seemed to be that markets are looking past the near-term weakness in earnings and into 2021.
He said investors were cheered by the re-opening of the economy from COVID-19 and the fact that economic activity is improving from a very low level. Oil price stability was another plus.
“Compared to market drawdowns in past recessions, the speed and scale of this rebound is unusual,” Mr Craig said.
“The difference here is huge amounts of stimulus from governments and central banks … that’s pushing up bond valuations and making equities look like the more attractive option for adding risk in portfolios, partially explaining why the markets have bounced so hard off what is still only a moderate outlook.”
The financial sector was the standout performer, and added a whopping 3.46 per cent.
The big four banks were strong: Commonwealth Bank rising 3.25 per cent, Westpac up 4.36 per cent, NAB gaining 4.59 per cent, and ANZ climbing 5 per cent. Macquarie Group rose 2.46 per cent.
The banks were ably supported by a 3 per cent gain for property stocks and the buoyant energy and tech sectors.
Buy now, pay later firm Afterpay rose 5.5 per cent to touch a new record high $52.29.
The materials sector rose 0.63 per cent with BHP leading the charge. The global miner rose 2.63 per cent to $36.34, while Rio Tinto added 0.46 per cent to $97.42.
Fortescue Metals earlier set a new record high $14.96 but finished the day 0.41 per cent lower at $14.66.
Only the health sector was subdued on Wednesday, with CSL down 0.41 per cent to $283.55.
Futures are pointing to more gains on overseas markets tonight.