The Australian sharemarket climbed to an 18-month high on thin volumes as improved Chinese industrial profits swept aside concerns the US was about to hit the debt ceiling and tilt over the fiscal cliff next week.
The S&P/ASX 200 index opened in the red but rallied to close 12.8 points, or 0.28 per cent, up at 4648 points, with the larger cap stocks lagging the 0.8 per cent bounce in the small ordinaries index.
Overnight Wall Street fell 0.5 per cent as there appeared to be little sign of a breakthrough on US budget talks. Treasury Secretary Timothy Geithner also said the US would reach its statutory debt limit on December 31, although he said he would use "extraordinary measures" to forestall the country defaulting on interest payments.
Japan's Nikkei index extended its meteoric rise, climbing another one per cent today, after the yen hit a two-year low against the US dollar as the new government prepared implement further stimulus measures to inflate its one record debt load away.
However, threatening to compound Japan's funding pressures - interest payments consumes about 25 per cent of all government revenue according to Hayman Capital fund manager Kyle Bass - 10-year government bond yields climbed 0.9 points to 0.799 per cent, up from the record low of 0.7 per cent reached on December 6.
The Shanghai composite index was off 0.1 per cent at the close of the ASX on profit taking, despite the 23 increase in company profits in November, up from 20 per cent in October and 3 per cent average for the first 11-months of the year.
Copper bounced 1.5 per cent to $US7926 a tonne on the Chinese data and gold was little changed at $US1658 an ounce while spot iron ore last traded at $US135.40 a tonne on Friday.
The Australian dollar eased to a six-week low of $US1.0355 as currency and credit markets reflected greater caution than equities over the looming US fiscal cliff.
Australian-dollar denominated corporate debt returned 11.1 percent in 2012, beating global peers for a third year in a row according to Bank of America Merrill Lynch. The demand for yield closed risk premiums over government securities slump 134 basis points to 158 basis points, the biggest contraction since 2009.More to come
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