New records on Wall Street and soaring metals prices pushed the local sharemarket higher on Wednesday, led by a rally in BHP Billiton.
Encouraged by strong economic data as well as a string of solid quarterly earnings, US investors lifted both the benchmark S&P500; index as well as the tech-heavy Nasdaq to all-time highs on Tuesday night.
![BHP was a shining light on Wednesday as its shares soared to 19-month highs.](/web/20170125114438im_/http://www.smh.com.au/content/dam/images/1/m/b/z/7/o/image.related.articleLeadwide.620x349.gtygmo.png/1485328564167.jpg)
Sentiment also got a boost as US President Donald Trump shifted his focus away from trade protectionism, which had spooked markets, and back to growth initiatives including promising corporate tax breaks and cutting regulation to fuel US investment.
In an eventful first few days in office, Mr Trump has already unwound a number of his predecessor's key policies, including a withdrawal from the Trans-Pacific Partnership as well as clearing the way for the completion of controversial oil pipelines.
For investors, Mr Trump's actions mean "we face a different set of policy risks, likely to be more sector and stock specific as existing advantages are withdrawn and new ones introduced via fiscal policy, whereas over the last few years we have seen monetary policy dominate, making it much more about the cost of capital than the return on capital", said Mark Tinker, head of Framlington Equities Asia at AXA Investment Managers.
The bullish tone on Wall Street combined with a rise in key commodities such as copper and iron ore to push local shares higher from the start. The benchmark S&P;/ASX 200 index ended 0.4 per cent higher at 5671, propped up by a 2 per cent surge in the materials sub-index.
BHP Billiton delivered the biggest boost to the index, jumping 3.3 per cent to a 19-month high of $27.89, after it confirmed its annual iron ore production guidance in a solid quarterly update.
Investors also cheered Rio Tinto's decision to sell its thermal coal assets, lifting the shares 3.8 per cent.
And further in the materials sector, Alumina soared 10.6 per cent, the biggest rise among the top 200 stocks, to hit a two-year high of $2.04, boosted by aluminium prices surging to 20-month highs and by quarterly earnings posted by its joint venture partner Alcoa.
"There are signs that investors are making way for materials stocks in their portfolio by reducing exposure to high growth stocks like CSL and Domino's Pizza," said CMC chief market analyst Ric Spooner.
Market darling Domino's fell 3.1 per cent, one of the day's biggest losers, while CSL ended 0.2 per cent lower.
Fourth-quarter consumer price data came in slightly below expectations, with core inflation riding just 0.4 per cent over the three months and 1.5 per cent over the year, well below the RBA's target band of 2-3 per cent.
The dollar slipped slightly to US75.40ยข in late trade, but overall the currency reaction was muted as the Reserve Bank last year signalled it's willing to accept lowflation for an extended period, worrying that further rate cuts could fuel a red-hot housing market.
But falling prices within the telecommunications segment sparked falls in telcos, sending Telstra down 0.8 per cent, while higher childcare costs led to an outperformance for the likes of G8 Education, up 2 per cent.
Banks were backed by a jump in bond yields, which is healthy for the financial sector, as well as rises in their US peers. ANZ was the top gainer among the big four, rising 1.1 per cent, while NAB rose 0.7 per cent, CBA added 0.6 per cent and Westpac inched up 0.4 per cent.
In other company news, Primary Health Care shares surged 5.1 per cent on reports that China's Jangho Group is seeking a $1 billion loan to expand its stake in the company.