WITH just one trading day left this year, the sharemarket climbed to a 19-month high yesterday as stronger iron ore, copper and oil prices boosted miners, and investors bought shares in anticipation that US politicians can reach a deal to avert the country's looming fiscal cliff.
The benchmark S&P/ASX 200 closed up 23.3 points, or 0.5 per cent, at 4671.3 points, its highest close since June 1 last year, when the index closed at 4707 points.
"Market participants are hoping US leaders can return to fiscal cliff negotiations over the weekend and knock up a deal before year's end," said Stan Shamu, a market strategist at brokerage IG.
Negotiations between ruling Democrats and opposition Republicans to avert the so-called fiscal cliff -- automatic tax increases and spending cuts due to take effect in January -- are running down to the wire.
US shares were sharply lower earlier yesterday after Democrat Senate majority leader Harry Reid said there might not be enough time to make a deal, but recouped most of their losses amid speculation that the House of Representatives would reconvene on Sunday US time to try to avert the fiscal cliff. President Barack Obama has cut short his holiday for the negotiations.
Australian shares opened stronger and rose to as high as 4688.6 points during the session before easing back slightly before the close.
John Milroy, an investment adviser at Macquarie Private Wealth, said that while trade was thin, some investors appeared to expect US politicians to strike a last-minute deal on the fiscal cliff.
"Our view is a deal will be done," Mr Milroy said, noting that opposition Republican lawmakers were under pressure to compromise with the ruling Democrats to avoid suffering any political fallout from being seen as "dragging their feet" on such a critical matter.
The Australian market was also lifted by mining and energy stocks that benefited by stronger iron ore, copper and oil prices.
BHP Billiton ended up 1.1 per cent, Rio Tinto was up 1.7 per cent and Fortescue Metals gained 2.4 per cent. Energy companies Woodside Petroleum, Santos and Oil Search were all up between 0.5 per cent and 0.9 per cent.
Retail stocks improved on Thursday's gains as shoppers sought out post-Christmas bargains. Department store chains Myer and David Jones added 0.9 per cent and 0.8 per cent respectively, while electrical goods and furniture retailer Harvey Norman was up 2.1 per cent and electrical retailer JB Hi-Fi improved 0.9 per cent.
In company news, construction company Leighton Holdings ended 0.3 per cent stronger after it won contracts worth $1.2 billion for civil and maintenance work at the Ichthys liquefied natural gas project in the Northern Territory.
The dollar recouped some of this week's losses. At the close it was buying $US1.0374, up US0.17c.
