The sharemarket retreated from its 11-month high on Friday, slipping just below the 5500 level it breached for the first time since August as investors took a breather in a strong two-week rally.
The S&P/ASX 200 ended Friday trade down 14 points (or 0.3 per cent) to 5498.2 points, but up 69 points (or 1.3 per cent) for the week. The All Ordinaries finished the week up 64 points, or 1.2 per cent, to 5574.3 points.
The week's rally has been broad-based, with all sectors bar mining and materials posting gains. Healthcare was the strongest-performing corner of the ASX, climbing 4.4 per cent over the five sessions, with CSL and Ramsay Healthcare rising to new highs.
Utilities also found favour as investors sought out more defensive names. The yield on Australian equities, at 4.5 per cent, is one of the reasons the Zurich-based Credit Suisse Investment Committee has moved from neutral to outperform on the asset class.
The local economy is solid, and a further interest rate cut should support momentum in the market, Credit Suisse private banking chief investment strategist for Australia David McDonald said.
"Although not outright cheap, the local market is around one standard deviation cheap against the MSCI World index on our measures," he said.
Second-quarter profit results season kicked off in the United States, buoying Wall Street and adding spirit to the local rally.
AMP Capital chief economist Shane Oliver noted of the 115 companies that have reported, 81 per cent beat earnings expectations and 58 per cent outperformed on sales.
"While the market expects profits to fall 3 per cent from a year ago, this will translate into a rise in profits of 8 per cent from the March quarter," he said.
Central banks again took centre stage this week. The European Central Bank early on Friday morning held off adding to its stimulus package. President Mario Draghi said the ECB had a "readiness, willingness, ability" to act as needed, and some economists including Capital Economics are tipping a loosening of monetary policy in September.
In Japan, the Nikkei rallied on talk that the Shinzo Abe-led government was planning a ¥20 trillion ($250 billion) stimulus package, double that previously anticipated. A day later, it was revealed that Bank of Japan governor Haruhiko Kuroda had previously talked down the prospect of helicopter money, or money printing as part of the package.
On Tuesday, minutes from the Reserve Bank of Australia's July meeting revealed inflation and labour and housing market data would "allow the board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate," which economists including Westpac's Bill Evans interpret as paving the way for another rate cut.
The Australian dollar tumbled 1.2 per cent to below US75¢ on the release, and remained largely range-bound for the remainder of the week ahead of Wednesday's key inflation report. The Aussie fetched US74.8¢ in late Friday trade.
The worst-performing top 200 stock for the day and over the week was tissue manufacturer Asaleo Care, which suffered a 30 per cent plunge in its share price after an earnings downgrade.
