Shares shook off uninspiring overseas leads on Wednesday to rise, with gains in the banks and a rally in Premier Investments offsetting losses in energy stocks.
The benchmark S&P;/ASX 200 Index and the broader All Ordinaries Index each climbed 0.5 per cent to 5651.4 points and 5703.4 points respectively.
![The market placed a great deal of faith in companies that were generating growth through acquisition.](/web/20170208072215im_/http://www.theage.com.au/content/dam/images/g/u/6/s/a/1/image.related.articleLeadwide.620x349.gu851t.png/1486537720167.jpg)
After a meek start to the day, investors gathered courage and there was strong buying support in the consumer discretionary sector, technology stocks and the banks.
"There's definitely an upbeat mood among investors as we see numerous positive earnings updates," said Gary Huxtable, client adviser at Atlantic Pacific Securities.
"And this has sparked investors into action, pushing our market higher and outperforming others across Asia."
Solomon Lew's Premier Investments provided some relief for investors burnt by recent profit downgrades in the sector. The owner of Portmans, Dotti, Peter Alexander, Jacqui E, Just Jeans, Smiggle and Jay Jays brands reported it expects first-half retail earnings to rise as much as 10.6 per cent to $93 million, sending shares 11.9 per cent higher to $14.01.
"Premier regularly gets a dark shadow cast across it by way of negative sentiment towards Australian retailers, with many investors not really understanding the company's growth story," Mr Huxtable said.
"The doom and gloom narratives towards Australian retail and Smiggle's UK exposure post-Brexit were overdone, with the stock reaching a state of being oversold over the last week."
Elsewhere in retail, shares in Specialty Fashion Group rocketed higher and closed up 26 per cent, after the company confirmed a Street Talk report that it received a $165 million take over offer from an unknown Middle Eastern financial conglomerate.
The big four banks enjoyed solid buying support, with ANZ and Commonwealth Bank of Australia closing up more than 1 per cent high, and National Australia Bank and Westpac close behind.
A 3.5 per cent jump in iron ore futures during Wednesday's session wasn't quite enough to boost Fortescue into the black, while resources giant BHP Billiton slipped 0.8 per cent due to a fall in oil prices. Rio Tinto, on the other hand, managed to close up 0.8 per cent just ahead of its annual result, which was posted after the market closed.
Genworth Mortgage Insurance was one of the worst performers on Wednesday, crashing 14.8 per cent after a disappointing set of full-year results. A fall in gross written premiums led to a 19.8 per cent decline in underlying net profit after tax.
Bellamy's slipped for just the second time in 10 sessions, losing 0.2 per cent to $4.89, despite news that US hedge fund Delta Partners has increased its stake in the organic baby formula company to just above 8 per cent.
Stock Watch: Seven Group
Seven Group shares jumped 14.4 per cent to $1.12, making it the best performer among the top 200 on Wednesday, after Goldman Sachs upgraded the stock to "buy" from "neutral", raising the price target to $8.50 from $7.48. The brokerage also lifted its financial year 2017 earnings-per-share forecast by 3 per cent for the Kerry Stokes-controlled group, which owns a 41 per cent stake in Seven West Media as well as the WesTrac Caterpillar dealership. Seven Group trades at more than 16 times its estimated profit for the coming year. Of the five analysts covering the stock, one now has a 'buy' rating and four see it as a 'hold', while the average 12-month price target is $7.51.
Oil
Oil prices extended falls from Tuesday's session, as a massive increase in US fuel inventories and a slump in Chinese demand implied that global crude markets remain oversupplied despite OPEC-led efforts to cut output. Brent crude was trading at $US54.54 per barrel, down 0.9 per cent, after having dropped 1 per cent on Tuesday night. The sharp declines came on the back of unexpectedly big increases in US fuel inventories, which traders said pointed to US petrol demand falling by an estimated 460,000 barrels per day - a scale of decline previously only seen during recessions.
Market sentiment
Two and a bit weeks into the Trump administration, market sentiment has shifted palpably from optimism to caution, and Goldman Sachs sees three reasons for the change: 1. unexpected hurdles in replacing Obamacare are a sign that getting Trump's pro-growth agenda through Congress may take longer than expected; 2. the polarisation of politics is getting worse and 3. Trump's focus on immigration and trade may prove more than disappointing for Wall Street and Corporate America, it could prove downright disruptive.
Chinese reserves
China's forex reserves unexpectedly fell just below the closely watched $US3 trillion level in January for the first time in nearly six years. Beijing has taken a raft of steps in recent months to make it harder to move money out of the country and to reassert a grip on its faltering currency, even as US President Donald Trump steps up accusations that Beijing is keeping the yuan too cheap. While the $US3 trillion mark is not seen as a firm "line in the sand", concerns are growing over how much longer authorities can afford to defend both the currency and its reserves.
Bitcoin
The price of digital currency bitcoin hit $US1069, its highest in a month, after the drop in Chinese foreign exchange reserves highlighted Beijing's efforts to control capital outflows. Bitcoin is used to move money across the globe quickly and anonymously and does not fall under the purview of any authority, making it attractive to anyone wanting to get around capital controls, such as China's. Data shows most bitcoin trading is done in China. In recent months, bitcoin and the yuan have frequently traded in an inverse relationship.