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Pre-Xmas buzz on the ASX

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The Australian share market is expected to continue to strengthen in the two days leading up to the Christmas close after the US Federal Reserve announced it will start to wind back its stimulus in a market-friendly way.

Telstra hit a near nine-year high on Friday after announcing it will sell its stake in Hong Kong mobile business CSL for around $2 billion.

The big four banks benefited from the US Fed’s announcement it will scale back its bond-buying program from January, with ANZ the strongest performer in percentage terms.

The banks continued their rise in early trade Monday; CBA was up 88 cents to $76.81 at 11am.

AMP Capital Investors chief economist Shane Oliver says he expects the Australian share market to gain.

“Investors had been worried for a long time about what the Federal Reserve would do,” Oliver said.

“They did taper but they are doing it in a very gradual way and they are also keeping interest rates really low.

“This buoyed sentiment last week, with virtually all markets having strong gains.”

Oliver said the Fed’s announcement combined with “New Year optimism” and a wind-down of capital raisings on the share markets will trigger further gains in the market on Monday and in the week ahead.

After the US announcement analysts said they expected the Federal Reserve will probably reduce its bond purchases in $10 billion increments over the next seven meetings before ending the program in December 2014, Bloomberg reported.

The median forecast in a Bloomberg survey of 41 economists matches the $10 billion reduction announced two days ago.

The US economy recorded third-quarter growth that exceeded expectations.

Gross domestic product was up to an annualized 4.1 percent; unemployment fell to a five-year low of 7 percent in November; inflation was 0.7 percent in October and has remained below the Fed’s 2 percent objective for almost a year and a half.

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