The Australian sharemarket closed higher yesterday as US President Barack Obama cut short his Christmas holiday to return to Washington for talks aimed at avoiding the so-called fiscal cliff.
Locally,investors remained optimistic that some kind of deal could be struck between Democrats and Republicans before automatic tax increases and spending cuts take effect next month.
The benchmark S&P/ASX 200 gained 0.3 per cent,or 12.77 points,to close at a new 17-month high of 4647.96.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,a 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."
Fortescue Metals was a standout performer,up 18c,or 4.1 per cent,at$4.53 after announcing it would resume work expanding the Kings deposit at its Solomon iron ore mining hub next month.
Other iron ore miners also rose as prices for the steelmaking commodity continued to show signs of stabilising,IG Markets analyst Stan Shamu said.Rio Tinto gained 61c to$65.45 and BHP Billiton added 13c to$36.99.
Retail stocks advanced as shoppers lapped up post-Christmas sales.Department store Myer added 6c to$2.13 and David Jones gained 7c to close at$2.41.Electrical retailer Harvey Norman climbed 1.6 per cent,or 3c,to$1.885 and entertainment goods retailer JB Hi-Fi finished up 0.3 per cent,or 3c,at$10.26.
Stuart Smith,senior client adviser at Bell Potter Securities,said the sharemarket was due for a spike,with shares looking"cheap"in valuation terms."It's a buyer's market,"he said.
The big four banks put in a mixed performance.National Australia Bank rose 0.3 per cent,or 7c,to$24.95 while Westpac,ANZ Bank and Commonwealth Bank fell between 0.2 per cent and 0.3 per cent.
Market activity was significantly lower after the Christmas break,with 849 million shares traded,compared to the typical level of about 1.4 billion.Market activity was worth$1.3 billion.
The spot price of Sydney gold closed at$US1655.60,down$US3.63 from Monday's local close of$US1659.23.
The Australian dollar closed below$US1.04c for the first time since November as investors poured into the US dollar amid ongoing US budget talks.
At 5pm AEDT yesterday,the dollar was trading at$US1.0357,down US0.52c.
