The ASX 200 is within an arms reach of all-time record highs

The ASX200 is less than 1% away from all-time highs, bolstered by banks surging past COVID highs and record iron ore prices

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The ASX 200 pushed 0.70% higher on Wednesday to 7,117.  This is within an arms reach of its 7,160 all-time record high. 

Below, we take a look at what is happening in the market to drive this rise. 

What’s driving the ASX 200 to near record highs? 

Banks lifting the market 

The big 4 banks have surged in recent months to beat pre-COVID levels. This has been supported by a broad range of factors including a roaring property market, rebounding economy, and significant decline in loan impairments and bad debts. The ASX 200 is heavily concentrated towards banks, with the financial services sector contributing to 27.9% of the overall ASX 200. 

Today, Australia and New Zealand Banking Grp Ltd (ASX: ANZ) delivered its half-year results which further reiterate the narrative of an improved economic outlook. Despite the ANZ share price sliding 2%, the company delivered a 45% increase in statutory profit after tax to $2,943. Additionally, ANZ had a 28% increase in cash earnings from continuing operations of $2,990 million. 

Iron ore lifts miners to record highs 

Record iron ore prices have pushed the share prices into record territory. In particular, BHP Group Ltd (ASX: BHP), Fortescue Metals Group Ltd (ASX: FMG), and Rio Tinto Limited (ASX: RIO) have benefitted from this.

Iron ore prices have defied bearish expectations. Furthermore, they have continued to be bolstered by strong global steel demand and Chinese steel production, weak iron ore production from Brazil, and lower end of guidance ranges for Australian producers. 

The materials sector accounts for approximately 20% of the ASX 200. The S&P/ASX200 Materials (INDEXASX: XMJ) has already managed to pop a new record high before the broader market. 

What about other sectors 

Banks and miners have been the main drivers for the broader market. Other sectors that have also shown improvement include consumer discretionary, industrials, and technology.  Respectively, these account for 8%, 7.4%, and 4.5% of the ASX 200. 

Elsewhere, sectors such as healthcare and consumer staples have had relatively flat 12-month performances. This can be attributed to the recent normalisation in in-home consumption and demand for COVID-19 related equipment, which has seen these sectors give back returns achieved last year. 

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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