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Australia: Shares post biggest rally in 5 weeks on Fed outlook

[SYDNEY] Australian shares rose the most in five weeks on Wednesday after the Federal Reserve suggested it may raise US rates later than previously thought while energy stocks followed the surging oil price higher.

The Fed downgraded its economic growth and inflation projections for the US, triggering a relief rally on Wall St as investors bet that any rate hike will be later rather than sooner. "Everyone feels the Fed's not quite as aggressive and will be exercising a lot of caution going forward," said IG Markets strategist Stan Shamu. "The rates lift-off in the middle of the year is not really the case now, and that's positive for equities all round because it looks like money will stick around for a little while longer," Melbourne-based Shamu said.

By 0133 GMT the S&P/ASX 200 index was up 1.4 per cent or 83.9 points at 5938.2, its biggest percentage gain since Feb 13 and its highest intraday level in two weeks. Every sector was up.

A 6 per cent rally in the oil price overnight also helped push energy stocks higher, with Woodside Petroleum and Origin Energy each up 1.4 per cent and Santos 1.8 per cent firmer.

Gold giant Newcrest Mining led resource stocks higher after the precious metal gained overnight, jumping 6 per cent. Iron ore major BHP Billiton rose 1.4 per cent and Rio Tinto added 0.2 per cent.

Banks firmed amid hopes lower interest rates will translate into more home loans. Westpac Banking Corp rose 1.8 per cent Commonwealth Bank of Australia by 1.5 per cent, National Australia Bank by 1.4 per cent and Australia and New Zealand Banking Group by 1.6 per cent.

Australian No 1 department store operator Myer Holdings tumbled 9.5 per cent after posting a lower-than-expected half yearly profit and downgrading its forecast for the full year.

New Zealand's benchmark NZX50 index edged up 13.1 points or 0.2 per cent to 5,859.84, supported by gains in consumer-related and telcom shares.

Online auction site Trade Me Group rose 2.1 per cent after data showed strong demand for housing related services, raising optimism about its property services.

Further index gains were clipped by a 2.3 per cent slide in Contact Energy while transport firm Mainfreight slipped 1.1 per cent after saying it expected full-year earnings growth to be smaller than last year's.