The Australian sharemarket extended its recovery rally on Wednesday, hitting the ground running as European Central Bank stimulus talk fuelled investor confidence and ending higher for a seventh straight session.
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The benchmark S&P/ASX 200 Index rose 60.9 points, or 1.1 per cent, to 5385.9, taking its gains since its recent low on October 13 to 5.15 per cent. The broader All Ordinaries Index rose 61 points, or 1.1 per cent, to 5373.
Materials, consumables and industrials underpinned the market's rise, while the utility sector was the worst performer of the day.
Global equity markets had risen overnight on reports the ECB is considering buying corporate bonds on the secondary market and may decide on the matter as soon as December.
In local economic news, benign inflation data showing that consumer prices rose 0.5 per cent in the September quarter, which took the headline annual number to 2.3 per cent, were broadly in line with expectations.
Despite the current stretch of gains, Commonwealth Bank of Australia director of equity strategy Tim Rocks said Australian equities were likely to continue their underperformance of global markets.
He said that as long as Australia's terms of trade continued to trend downward, corporate earnings would remain under pressure and the local market would continue to underperform.
"Most of that [underperformance] is due to the different earnings outlook in Australia compared to the rest of the world," Mr Rocks said.
When comparing post-global financial crisis earnings, Australia's have grown only a fraction of that of their star-spangled big brother, and worse still, unlike the US, they are yet to surpass their pre-GFC peaks.
US earnings are up more than 20 per cent since the global financial crisis, while Australian earnings have fallen about 25 per cent.
Mr Rocks took particular aim at the mining sector, saying its growth forecasts were too optimistic and needed to be adjusted.
"The simple correlation between resource prices and profits suggests that they should be down about 10 per cent," Mr Rocks said.
Among the miners on Wednesday, Rio Tinto rose 2.1 per cent to $61.21, while BHP Billiton rose 1.5 per cent to $34.27.
Cooper basin oil and gas producer Senex Energy reported September quarter production figures roughly in-line with expectations, including a 27 per cent production increase on the prior year corresponding period, but a 12 per cent drop on the June quarter.
JPMorgan said the quarter was a good one for Senex and the decline in output from the immediately preceding quarter was due to "normal decline rates".
Telstra also saw some small gains after announcing a partnership with Swiss eHealth provider Medgate. The telco rose 0.7 per cent to $5.46.
The banks performed well and according to Mr Rocks were the "one bright area" on the Australian equities landscape, as long as "housing remains strong".
"The economy really needs housing to remain strong, and if housing remains strong through next year, then that's the top line of your banks sorted out," Mr Rocks said.
Commonwealth Bank of Australia rose 0.5 per cent to $77.57 and Westpac Banking Corp rose 1 per cent to $33.74.
ANZ Banking Group rose 1.3 per cent to $32.88, while National Australia Bank rose 1 per cent higher at $33.85.
Food and liquor retailers rose, with Woolworths up 0.2 per cent to $34.80, and Wesfarmers, owner of Coles, rising 1 per cent to $41.85.
