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Australian stocks close up, shrug off Greenspan

SYDNEY: The Australian share market

closed higher on Friday in a last minute flurry of activity,

shrugging off a firm signal by Fed chairman Alan Greenspan that

US interest rates are about to rise. The benchmark All Ordinaries Index closed up 35.8 points or

about 1.2 percent at 3,131.6 on Friday and was about 2.9

percent higher on the week. Traders said the possibility of higher rates in the US

and at home were well priced in to the market. However, they

conceded rising bond yields would likely remain a negative for

interest-rate sensitive issues such as banks. "Eventually, rising bond yields will bring this market to a

halt," said BNP Australia's equities strategist Dennis Mahoney. "I don't think we have much of a correction in store but it

is difficult to see further rises being made," he said. Addressing the Economics Club of New York at about 12:30

p.m. Greenspan signalled the Fed will hike

short-term rates to prevent the US economy from overheating. The Fed's FOMC rates-setting committee meets on February

1-2 and economists expect a 25 basis point rise in the key fed

funds rate to 5.75 percent. Australia's Reserve Bank board is also expected to approve

a hike in the local official cash rate by 25 bp to 5.25 percent

when it meets on February 1. Many pundits think, however, that

a 50 bp rise is just as likely. The banking sector sub index which has been sagging since

the RBA increased its official cash rate last November,

reversed its recent trend to close up 1.6 percent on the day. Sector heavyweight National Australia Bank, which only this

week was at a 14-month low, gained 2.2 percent to A$21.91

(US$14.68). Elsewhere, one of the better performers was Australia's

second largest telco, C&W Optus, which closed up 18 cents or

about 3.4 percent at A$5.50, a record close. Traders attributed the interest in the stock to

expectations that its December quarter mobile phone customer

figures would show a strong rise, plus the possibility that

majority owner Cable & Wireless Plc might sell its stake. Turnover on the wider market was A$1.4 billion. Advancing stocks outpaced declines by a ratio of seven to

five, while about 22 percent of stocks traded remained steady.-Reuters