After a dip into the red in early trade the Australian sharemarket edged higher as global borrowing costs slipped lower and the wholesale selling across Asian markets abated.
The S&P/ASX 200 index followed the firmer lead from Wall Street to gain 21.8 points, or 0.43 per cent, at 5100 points on low volume, with the major banks accounting for most of the gains after mining giant BHP Billiton disappointed investors with its earnings report.
Trade remained cautious ahead of the release of the US Federal Reserve’s July board meeting minutes tonight which markets fear could indicate further willingness for tapering the $US85 billion a month bond buying program.
Offering some relief to stocks, benchmark US 10-year yields dipped 5 points to 2.87 per cent, although Australian government 10-year yields eased just one point to 3.965 per cent, as traders squared off holdings.
The US dollar also lost ground against the euro and the yen, but the Australian dollar remained on the back-foot, easing 0.3¢ to US90.20¢.
The euro held firm despite a fresh surge in Spanish bank bad debts to 11.6 per cent of all outstanding loans, and comments from German finance minister Wolfgang Schaueble that Greece would need another bailout.
European indices were dragged down by heavy selling of Spanish and Italian banks.
The Shanghai composite index traded in and out of the red and was off 0.4 per cent at the close of the ASX.
In Tokyo the Nikkei index fell sharply mid-session but bounced to close 0.2 per cent up after the Japanese government raised the severity rating of risks at the damaged Fukushima nuclear power station because of persistent leaks of radioactive water.
Gold bounced $US20 from Tuesday’s low to $US1373 an ounce, before slipping to $US1368 an ounce, while copper eased 0.5 per cent to $US7286 a tonne and spot iron ore eased 0.1 per cent to $US139 a tonne on yesterday.
Royal Bank of Scotland currency strategist Greg Gibbs said markets were turning their attention back to economies running current account deficits, including Canada and Australia, both market darlings for the past four years.
“Apart from the slower growth and weaker confidence in the Chinese economic outlook, the weaker transmission of major economies’ QE policies to Asian markets has followed severe deterioration in the most structurally challenged economies in the region and other large (emerging market) countries,” he said.
“Weaker debt and external balance positions in the region, particularly in the larger more significant growth drivers, will discourage capital inflow, no matter how cheap credit can be accessed.”
The broader All Ordinaries index was up 21.5 points, or 0.42 per cent, at 5090.3.
On the ASX 24, the September share price index futures contract was 23 points higher at 5074 with 23,425 contracts traded.
IG Markets institutional dealer Chris Weston said there was no real explanation for why the big four banks were all higher.
"It’s been a tale of some sort of variance in the mining space, but banking stocks have really been on fire today and that’s really why the market’s been moving up,” Mr Weston said.
"There’s no real smoking gun."
He said investors were keeping an eye on the flight of capital from emerging Asian markets to the United States and European markets.
"The prospect of a negative situation in that region is really escalating,” he said.
Among the banks, NAB gained 57 cents to $32.14, Commonwealth Bank added 83 cents to $71.10, ANZ was up 17 cents at $29.73, and Westpac rose by 15 cents to $31.29.
Macquarie Group gained 80 cents to $44.60.
In the resources sector, BHP Billiton dropped 80 cents, or 2.2 per cent, to $35.74, after its weaker than expected annual profit result announced late yesterday.
Oil and gas giant Woodside also fell, despite a rise in its half year profit due to strong production from its giant Pluto gas plant. Its shares dropped 60 cents to $38.10.
Other energy and mining stocks performed better, with Rio Tinto gaining nine cents to $59.60, Fortescue added four cents to $4.09, and Oil Search was four cents higher ay $8.25.
Among the many companies to report profits, Super Retail was one of the worst performers on the market.
Shares in the auto, sports and leisure retailer dropped 65 cents, or five per cent, to $12.30, despite the company’s 23 per cent full year profit growth.National turnover was 1.7 billion securities worth $3.9 billion.