The ASX has just hit its highest point since early August on an intoxicating mix of global optimism and local takeover fever.
If the benchmark index were to end the session at its current level of 5589.9 it would be the highest close of the year, but it needs another 21 points to take out the intraday high.
The rally is all the more remarkable for its breadth, with some of the previous out-of-favour sectors spearheading today’s charge.
“While investor sentiment remains positive towards all sectors this morning, we have seen a change of fortunes as out-of-favour sectors currently enjoy their moment in the sun,” said Atlatnic Pacific Securities client adviser Gary Huxtable.
“Investors are piling into shares and sectors that are poised to benefit from what could be described as a dovish rate hike in the US tomorrow.”
The US Federal Reserve will announce its monetary policy decision at 6am AEDT and markets are seeing a close to 100 per cent chance the central bank will lift its key rate for the first time this year and only the second time since before the global financial crisis.
“On the whole, most rational investors would be conceding a rate hike and hoping for a dovish theme within the statement to dampen down expectations of hikes throughout 2017 and beyond. This is leading to bond proxies, mid-cap growth names and gold miners being favoured this morning,” said Huxtable.
While merger news and subsequent upgrades of profit guidance have been a welcome sight this morning, Huxtable noted that growth expectations were still well below pre-August report levels. As such, he commented that “investors will need to remain patient before recovering to previous levels.”