The Australian sharemarket finished firmly in the black, but halved early gains, as bargain hunters snapped up large cap stocks and markets priced in ongoing US Federal Reserve stimulus to offset the hit to global growth from a prolonged US government shutdown.
The S&P/ASX 200 index climbed 19.2 points, or 0.37 per cent, to 5234.9 points with a slower rate of contraction in the AiG services index supporting the domestic growth outlook.
Overnight US stocks pared early losses as Boston Fed president Eric Rosengren said the disruption of US debt collection could delay the tapering of bond purchases.
The US government shutdown looked set to extend to the fourth day after President Barrack Obama said he refused to negotiate on raising the US debt ceiling, and analysts warned that each day of closure “eats into US fourth quarter GDP”.
The Australian dollar remained on a roller-coaster ride, bouncing from its overnight low of US93.40¢ to US93.90¢, while government 10-year yields eased 1.2 points to 3.932 per cent.
Westpac chief economist Bill Evans said although his forecasts for domestic and “soggy” global growth had not changed, he was revising his rate cut forecast to February from November.
He said the Reserve Banks growth outlook was “more upbeat”, based on recent boost to business and consumer confidence following the election, but he warned of a possible repeat to the lack of follow-though to a Coalition electoral victory in 1996.
“By February, with the AUD heading in the ’wrong’ direction; a clear need to lower both domestic and global growth forecasts; confidence waning; and the surge in house prices looking contained, the Reserve Bank is likely to return to easing policy with two more cuts expected in February and May,” Mr Evans said.
In Tokyo the Nikkei index was off 0.1 per cent at the close of the ASX, while Chinese markets weer closed for a public holiday.
The broader All Ordinaries index was up 17.1 points, or 0.33 per cent, at 5232.
On the ASX 24, the December share price index futures contract was 17 points higher at 5229, with 21,670 contracts traded.
Firmer commodities prices and positive Chinese economic data drove buoyed local investors, IG market strategist Chris Weston said.
That came after falls on Wall Street and European markets as the partial US government shutdown entered its third day.
"Right now it doesn’t seem like there are a huge amount of reasons to panic because people do believe we are going to get something cobbled together,” Mr Weston said of the US talks.
Mining giant BHP Billiton gained 29 cents to $35.60, Rio Tinto added 49 cents higher at $60.67, but Fortescue Metals fell in late trade, losing one cent to $4.77.
The gold price also posted strong gains, pushing Newcrest Mining up 35 cents, or 3.2 per cent, to $11.30.The big four banks were all higher, with National Australia Bank up 37 cents to $34.89, Westpac up 21 cents to $32.64, ANZ up six cents to $30.96 and Commonwealth Bank three cents higher at $71.70.
Construction giant Leighton Holdings was one of the day’s biggest losers, dropping $2.04, or 10.4 per cent, to $17.54, after media reports of allegedly corrupt practices in Leighton’s international operations.National turnover was 1.3 billion securities worth $2.5 billion.