Australian shares advanced on Friday, ending a volatile week on an upbeat note after the Federal Reserve signalled US interest rates may stay lower for longer.
Australia’s benchmark S&P/ASX 200 index added 1.3% on Friday to close at 5,597. However, gains over the week stood at 1% in nervous trading.
“Today the market is up about 1%. Yesterday was the worst day for our market in about a fortnight,” said CommSec market analyst Steven Daghlian.
“A lot of the focus has been offshore and the market has just gone back and forth between gains and losses this week.
“The Fed and the euro zone have been the focal points,” Daghlian said.
Eurozone finance ministers began meeting earlier this week with a view to resolving Greece’s inability to repay its debt. They have so far failed to reach a deal with Greece, raising the possibility of default and making financial markets worldwide, including Australia, nervous.
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Low US rates support shares
However, on a more a positive note, the US Federal Reserve held interest rates steady. The Federal Open Market Committee (FOMC) left the key federal funds rate unchanged at 0-0.25%. The FOMC is the rate-setting arm of the US Federal Reserve.
The FOMC also pared its US economic growth forecast to 1.8-2.0% from 2.3-2.7%.
Investors on Wall Street and in Australian shares drove share prices higher on the back of the news. Low interest rates underpin shares by making bank deposits relatively less attractive.
The US dollar weakened on the news, propelling the Australian dollar well above US78 cents in overnight trading offshore. The Australian dollar stood at US77.64 cents late on Friday afternoon.
Woolworths gets a boost
Woolworths (ASX: WOW) had a rollercoaster week, closing about 2.6% ahead on Friday and 1% for the five days.
Earlier in the week, Australia’s largest supermarket operator said chief executive Grant O’Brien would resign and the company would launch an international search for a replacement.
It also watered down its outlook and announced job cuts for the second time in two months.
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Investors apparently viewed the departure as a fresh start that would allow Woolworths to refocus on its core food and liquor business and resume its growth trajectory.
In terms of trading value, Woolworths was the highest turnover non-bank stock on Friday, with $345.9m worth of shares in the company changing hands.
Banks bounce back
Australia’s four major banks ended the week higher after steady declines over the past three months.
Australia and New Zealand Banking Group (ASX: ANZ) gained 3.5% over the week to $32.76; CommBank (ASX: CBA) climbed 3.9% to $84.47; National Australia Bank (ASX: NAB) powered 4.6% ahead to $33.66; and Westpac Banking Corp (ASX: WBC) rose 3.9% to $32.80.
Meanwhile, Insurance Australia Group (ASX: IAG) increased 3.2% over the week to $5.75 after Warren Buffett’s Bershire Hathaway bought a $500m stake in the personal insurer.