Australian shares up 0.6 pct, banks lead market to highest close in 7 wks

Mon Apr 29, 2013 2:54am EDT

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SYDNEY, April 29 (Reuters) - Australian shares rose 0.6 percent to its highest close in seven weeks on Monday, led by strong gains in the banking sector as investors chased high yielding stocks in a session characterized by some caution after Friday's disappointing U.S. first-quarter growth figures.

Westpac Banking Corp posted the largest gain in the sector, jumping 1.7 percent while top lender, the Commonwealth Bank of Australia climbed 1.1 percent.

"Investors and traders doing what they seem to know best - buying yield names," said Chris Weston, chief market strategist at IG Markets.

"The banks will be in play given they (except CBA) report H1 earnings."

Australia and New Zealand Banking Group added 0.7 percent. ANZ is due to report its half year earnings on Tuesday.

Dividend yield on average for the four banks is some 5.1 percent, compared with between 3 percent and 4 percent yields for a typical 12-month deposit account.

The S&P/ASX 200 index climbed 28.3 points to finish at 5,125.8, its highest close since March 8.

Despite the modest loss of 0.1 percent on Friday, the market posted a 3.4 percent gain for the week - its biggest advance since December 2011. Last week's advance was underpinned by buying in previously beaten down sectors and demand for financial stocks for their attractive dividend yields.

"We're still around the 5,100 point mark, I don't think that's changing too much at the moment. We're still very much on an upward trend when it comes to how we've performed in recent months and week," said Steven Daghlian, market analyst at Commonwealth Securities.

"We've been increasing and improving quite strongly so far this month, we're up about 2.5 percent, and pretty much wiped out all the losses recorded last month."

A run of weak data from the United States, China and Germany over the past few weeks have weighed on the Australian market, but underlying demand has been sustained by a resilient domestic economy and a strong earnings season. The benchmark index has gained around 10 percent so far this year.

On Friday, U.S. data showed gross domestic product expanded at a 2.5 percent rate in the first quarter, below estimates of 3 percent, heightening fears the economy could struggle to cope with deep government spending cuts and higher taxes that kicked in earlier this year.

Mining stocks underperformed due to weak metals prices and concerns about slowing global demand for commodities. Mining heavyweights BHP Billiton Ltd and Rio Tinto Ltd fell 0.1 percent and 0.8 percent respectively.

BHP Billiton has agreed to sell its Pinto Valley copper mine and a railroad in Arizona to Capstone Mining Corp for $650 million, reaping far more than expected as the top global miner tightens its belt in a weaker market.

Copper drifted lower on Monday as slower-than-expected U.S. growth hurt the demand outlook for the metal.

Defensives were firmer, with supermarket retailer Woolworths Ltd up 0.3 percent and top telecommunications provider Telstra Ltd 0.2 percent higher.

New Zealand's benchmark NZX 50 index climbed 0.7 percent or 32.3 points to a record closing high of 4,580.96. (Reporting by Thuy Ong; Editing by Shri Navaratnam)

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