Australian shares rose to a 4 1/2 year high yesterday on strength in Asian and European markets.
US economic data beat expectations and central bankers in Europe and the US reassured investors easy monetary policy will continue.
Domestic private new capital expenditure data had mixed implications because the December quarter was weaker than forecast, yet expectations for 2013-14 were better than expected.
The benchmark S&P/ASX 200 closed 1.3 per cent higher at 5104.1 after a late afternoon rise to 5112.5 -- its highest level since September 2008. The index rose 4.6 per cent in February. It is up 9.8 per cent so far this year.
The value of shares traded rose to $7.6 billion compared with the 20-day moving average of $4.9bn.
"It's game on again as the recovery in European equities removes concern about Italy's commitment to austerity measures," CMC Markets chief market strategist Michael McCarthy said. "It would be very difficult for any Italian government to step away from austerity because of the associated blowout in borrowing costs."
The US S&P 500 rose overnight after better-than-expected existing home sales for January, and Federal Reserve chairman Ben Bernanke reiterated his view that the benefits to the economy from the Fed's $US85 billion ($82bn) a month asset purchases far outweighed the cost.
His comments this week put an end to fears raised by recent Federal Reserve Open Market Committee minutes that there was apprehension in the Fed over the risks of quantitative easing.
Strong Asian markets also underpinned Australian shares.
Japan's Nikkei 225 was up 2.7 per cent, China's Shanghai Composite rose 2 per cent and the Hang Seng was 1.5 per cent firmer in late trading.
Domestically, private new capital expenditure in the quarter to December fell 1.2 per cent versus an expected 1 per cent rise while the first estimate of 2013-14 capex fell 8.1 per cent compared with the first estimate for 2012-13.
"While the capex plans weren't quite as bad as feared, and are always hard to interpret, it nevertheless confirms that the peak in mining investment is near and that it's still unclear that non-mining investment will fill some of the gap left by the mining sector," said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors.
"Interestingly, while the bulk of the downward revision for the December quarter was in mining, other sectors of the economy aren't really compensating for the mining slowdown.
"The overall picture suggests that (interest) rate cuts are getting some traction, but that the RBA probably still has more work to do in terms of cutting interest rates."
Energy, consumer staples, financials, healthcare and industrials stocks led broad gains with Woodside up 3.6 per cent, Woolworths up 2.7 per cent, Westpac up 1.9 per cent, CSL up 2 per cent and Brambles up 2.1 per cent.
Woolworths rose after upgrading its fiscal 2013 net profit guidance.
The Australian dollar, meanwhile, was sharply higher in Asia after companies reported better-than-expected investment intentions for the coming year.
The solid investment report triggered heavy buying of the dollar as traders reduced bets on a further cut in interest rates by the Reserve Bank in coming months.
In early evening trading yesterday, the Aussie was buying $US1.0274, up from $US1.0217 late in local trade on Wednesday.
