LOCAL shares closed higher today as US President Barack Obama cut short his Christmas holiday to return to Washington for talks aimed at resolving the so-called fiscal cliff.
Investors in Australia's sharemarket remained optimistic that some kind of deal could be struck between Democrats and Republicans ahead of automatic tax increases and spending cuts set to go into effect starting January.
Australia's benchmark S&P/ASX 200 gained 0.3 per cent to finish at 4648 points-even after US shares closed lower overnight as prospects for a timely resolution of the impasse among U.S.lawmakers appeared to dim.Other Asia markets also recorded gains,with Japan's Nikkei Stock Average rising to a new year-to-date high.
"I think people are taking a view that although the prospects of a full resolution of differences[over the fiscal cliff]may not occur prior to year's end,that middle ground will be found,"said Tim Schroeders,an Australian fund manager at Pengana Capital."A strong Japanese market and light volumes have been enough to see the market in Australia finish with a gain."
Australian shares opened slightly weaker,after US stocks fell amid uncertainty surrounding the negotiations.The Dow Jones Industrial Average fell 0.2 per cent for the third consecutive drop,while the Standard&Poor's 500 index sank 0.5 per cent.The Nasdaq Composite Index declined 0.7 per cent.
Australian shares rebounded in afternoon trade as news filtered through that Mr Obama had cut short his vacation,with the US Congress scheduled to resume work later on Thursday.Lawmakers have until January 1 to iron out a deal to avert the fiscal cliff.
"The market is taking an optimistic view on the US,"said James Rosenberg,a private client adviser at Macquarie Private Wealth,adding that trading volume was thin.
Fortescue Metals Group finished up 4.1 per cent after the iron-ore producer said it would resume expansion in the new year of its Kings deposit in Australia's resoruce-rich Pilbara region as demand recovers.Other mining companies,including Rio Tinto and BHP Billiton,also climbed.
Retail stocks advanced as Australian shoppers lapped up post-Christmas sales.Department stores Myer and David Jones gained 2.9 per cent and 3 per cent,respectively.Electrical retailer Harvey Norman climbed 1.6 and entertainment-goods retailer JB Hi-Fi finished up 0.3 per cent.
Stuart Smith,senior client advisor at Bell Potter Securities,said Australia's sharemarket was due for a spike anyway with shares looking"cheap"in valuation terms currently."It's a buyer's market,"he said.
Australia's big four banks put in a mixed performance.National Australia Bank rose 0.3 per cent,while Westpac Banking Corp,Australia&New Zealand Banking Group and Commonwealth Bank of Australia dropped 0.2 per cent to 0.3 per cent.
