The Australian sharemarket climbed on Monday, led by blue-chip names such as the big banks and spurred on by merger and acquisition activity, while a leap in the iron ore price supported miners.
Despite a weak lead from Wall Street, the S&P/ASX 200 index surged within an hour of opening and reached a high of 5733 in the middle of the day before fading to close at 5712.5, up by 1 per cent. The All Ordinaries also gained, up by 0.9 per cent to 5719 points.
All sectors finished the day higher in a broad-based rally. Telstra was among the biggest boosts to the benchmark index after it climbed 1.3 per cent to $6.28, while heavyweight CSL added 1.8 per cent to $92.80.
But the biggest gainers of the day all announced merger discussions or deals.
Skilled Group jumped 11.8 per cent to $1.37, after the labour hire and recruitment company announced it had resumed merger talks with Programmed Maintenance Group, which dropped 4.2 per cent to $2.51.
Nickel miner Sirius Resources led the market, up 20.3 per cent to close at $3.90, after a $2.7 billion merger with base metals miner Independence Group was announced.
Patersons Securities head of research Rob Brierley said these deals likely marked the beginning of a spate of mergers as the mining industry consolidated.
"There is a bit of industry consolidation required so it will continue. There are a lot of players and most are micro-caps that will disappear with time, but mergers in the mid-cap space are also likely, such as those today."
Mr Brierley said the Independence deal in particular showed there was still market appetite for companies with a strong growth profile such as Sirius resources.
Monday also saw strong gains for the big miners after the iron ore price rallied 3.5 per cent on Friday night to $US59.96/tonne.
Rio Tinto closed on $57.63, up by 1.6 per cent, and BHP Billiton also gained slightly, up 0.8 per cent to close at $29.48. Fortescue Metals Group also closed higher, up 2.8 per cent to $2.17.
"Today illustrated how leveraged resource and energy equities are to China," Mr Brierley said.
"We're expecting the iron ore price will consolidate around this level as there were never any real worries about demand, so the oversupply story should settle now some production has dropped off."
Oil companies also saw a moderate increase as improved sentiment saw a record run of weekly advances. Senex Energy led the gains, climbing 5.6 per cent to close at $0.38.
Westpac Banking Group climbed 1.2 per cent to $32.96, National Australia Bank added 0.9 per cent to $33.53, Commonwealth Bank of Australia was up 1.1 per cent to $84, and ANZ Banking Group climbed 0.8 per cent to $32.32.
But despite the days's gains, Credit Suisse announced it had dropped its ASX 200 index target to 5850 and downgraded its view on the Australian sharemarket to "neutral", citing weaker commodity prices, disappointing results for bank earnings and the renewed strength of the Australian dollar.
"The earning outlook crunch in the last few months is the main issue," chief investment strategist for Australia David McDonald said. "First it was the resources sector, and then the banks, and the two together are half the market."
Mr McDonald said they were looking forward to capital expenditure data, due on Thursday, to see how other market segments of the economy might be investing.
"We were also looking for a lower Aussie dollar to boost competitiveness, but that hasn't happened yet. We think it should be down in the mid 70s but don't expect that without stronger US data or the Fed rate hikes in September."
