LOCAL shares rose for the third straight day today, hitting a fresh 17-month high as investors sought defensive and higher-yielding stocks as concern grew over the fate of US negotiations on the so-called fiscal cliff.
The benchmark S&P/ASX 200 closed up 0.4 per cent at 4634.1 points, the highest close since July 8, 2011. The resources sector was broadly down as investors retreated from risk assets, while stocks climbed in industries considered defensive such as healthcare, utilities and telecommunications.
"Defensives and dividend-yield plays are back on today," said Ben Le Brun, a market analyst at optionsXpress.
Australia's sharemarket had risen as high as 4643.5 points but retreated slightly after Australia's Treasurer Wayne Swan said falling tax receipts made it unlikely the federal government would now be able to fulfil a pledge to return a budget surplus this fiscal year.
IG strategist Stan Shamu said in a note that the Treasurer's announcement largely confirmed what the market had already known.
"As a result, this hasn't resulted in too big a move in equities," he said.
Australia's sharemarket bucked negative overnight leads from the US, where stocks fell as investors appeared to lose confidence in negotiations to try and avert a looming fiscal crisis.
The retreat came after strong gains earlier this week fuelled by hopes that opposing lawmakers in Washington were close to a consensus in budget talks ahead of a year-end deadline that would trigger a series of tax hikes and spending cuts.
US stocks fell on Wednesday as Republican John Boehner suggested a "Plan B" to fiscal-cliff negotiations that would keep income-tax rates the same for all Americans earning less than $US1 million a year--a proposal Democrat President Barack Obama had already indicated he'd veto.
The Dow Jones Industrial Average fell 0.7 per cent and the S&P 500 finished down 0.8 per cent.
Australia's big four banks, considered high-yield stocks, all ended higher. Westpac and ANZ both rose 0.7 per cent, while National Australia Bank and Commonwealth each advanced 0.3 per cent.
Blood products and vaccine maker CSL gained 1 per cent and telecoms giant Telstra closed 0.2 per cent higher.
Some of Australia's biggest mining companies fell, meanwhile. Fortescue Metals Group dropped 3.4 per cent, Rio Tinto lost 0.6 per cent and gold producer Newcrest Mining slipped 0.3 per cent. BHP Billiton, the world's largest mining company, also lost ground slightly.
Qantas gained 0.7 per cent after its proposed alliance with Emirates Airline received the conditional blessing of Australia's competition regulator. Dexus Property Group led property stocks higher, jumping 4.5 per cent after saying it had sold most of its US industrial portfolio for $US561 million--a 13 per cent premium to its book value.
OZ Minerals climbed 3 per cent after the company said it expected copper output in 2013 to be slightly lower than this year, and that earnings in calendar 2012 would be weighed down by lower commodity prices. The stock plunged nearly 10 per cent on Wednesday on concern over its production outlook.
Billabong International continued to struggle, dropping 5.9 per cent, as analysts downgraded their ratings on the surfwear maker after it cut earnings guidance on Wednesday, triggering a 13 per cent slide in its shares.
