Australia shares rally the most in 7-1/2 wks as Fed shift eases uncertainty

SYDNEY Wed Dec 18, 2013 8:05pm EST

SYDNEY Dec 19 (Reuters) - Australian shares rose the most in nearly eight weeks on Thursday morning, after the U.S. Federal Reserve committed to low rates and put an end to tapering uncertainty by announcing it would start scaling back its bond-buying stimulus next month.

Shares in Sydney got off to a positive start on the back of a strong showing on Wall Street overnight, with both the Dow and the S&P 500 closing at all-time highs.

"The equity market overnight received the Fed tapering as good news, in the sense the Fed had enough conviction in the growth outlook to be able to tighten," said Damien Boey, equity strategist at Credit Suisse.

On Wednesday, the Fed said it would modestly trim the pace of its monthly asset purchases, by $10 billion to $75 billion, and sought to temper the long-awaited move by suggesting its key interest rate would stay at rock bottom even longer than previously promised.

Top miners BHP Billiton Ltd climbed 1.6 percent and Rio Tinto Ltd gained 1.2 percent. Fortescue Metals Group Ltd jumped 2.3 percent.

On Wednesday, Australia raised its forecasts for exports of iron ore and metallurgical coal -- its two top export revenue earners -- reflecting massive expansion work underway to meet demand for raw materials to make steel in China.

Among the top banks, Commonwealth Bank of Australia added 0.5 percent and Westpac Banking Corp rose 1.1 percent.

The S&P/ASX 200 index rose 0.9 percent, or 47.4 points, to 5,143.5 by 0056 GMT -- its biggest daily gain since Oct. 28. The benchmark slipped 0.1 percent on Wednesday.

The Australian market has taken a beating in recent weeks, having fallen about 7 percent from a 5-1/2-year high of 5,457.3 hit on Oct. 28, as profit forecast downgrades and fears over early Fed tapering hit investor sentiment.

"It was a little confusing to try and marry up the market's logic with the Fed's announcements. Amazing what a little certainty can do for sentiment," said Scott Schuberg, CEO at Rivkin Securities.

He also noted the weaker AUD/USD pair might hurt foreign investor sentiment in Australian equities in some way.

The Australian dollar skidded to a three-and-a-half year low on Thursday morning as the Fed's decision to scale back its stimulus spurred a broad rally in the U.S. dollar.

Fuel marketer Caltex Australia Ltd surged 11.3 percent to a nearly two-week high, after it said it expected full year after tax profit on an historic cost basis in the range of A$540 million to A$560 million, compared with A$57 million a year ago.

Sundance Resources Ltd jumped 5.2 percent on news it had received a strong response to its call for tenders to finance and build the rail and port infrastructure for the Mbalam-Nabeba Iron ore project in Africa.

Ten Network Holdings Ltd gained 1.8 percent after it regained the rights to telecast the V8 supercars in a deal worth A$241 million, together with Foxtel and Fox Sports.

Engineering services company WorleyParsons Ltd lost 1.8 percent after it said it had been sued following a profit downgrade last month.

New Zealand's benchmark NZX 50 index added 0.6 percent to 4,703.9.

(Reporting by Maggie Lu Yueyang; Editing by Shri Navaratnam)

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