Bank dividend hunters again kept the Australian sharemarket in the black as other Asian markets traded sharply lower.
The falls overseas came as Chinese bank lending rates pushed higher and data showed the global manufacturing recovery had stalled.
Following the firmer lead from Wall Street, the S&P/ASX 200 index gained 13.4 points, or 0.25 per cent, to 5386.3 points as miners continued to struggle.
Overnight the French October manufacturing index contracted at a faster pace and the US manufacturing PMI index fell well short of forecasts, while Germany's PMI index edged up but remained below the recent peak reached in August.
However, the prospect of ongoing US Federal Reserve bond purchasing lifted equity markets.
The US S&P 500 index climbed 0.3 per cent, but bank stocks fell after the Fed said US banks were $US200 billion short of liquid assets for its proposed liquidity rules for "internationally active banks".
The Fed's rules are more stringent than the globally applicable Basel III rules and would come into effect sooner on January 1, 2015. Chairman Ben Bernanke said they were aimed at making the financial system safer.
In Tokyo the Nikkei index was down 2.5 per cent at the close of the ASX after Japan reported inflation of 1.1 per cent, but core inflation was just 0.7 per cent, showing the new government's radical "Abenomics" monetary policy was not having the desired effect on consumer spending.
"Today's data puts the spotlight on a bigger problem in Japan: the lack of domestic demand," Forex.com analyst Chris Tedder said. "Despite the best efforts of policy makers, domestic demand remains subdued. We think the problem is that household income isn't increasing enough to justify consumers spending more."
The Shanghai composite index was down 0.9 per cent after Chinese interbank rates climbed again when the People's Bank of China withdrew a net 58 billion yuan ($9.9 billion) this week, the most since February according to Bloomberg.
"We expect monetary policy to remain relatively stable, with some fine-tuning measures to be utilised in order to adjust liquidity conditions," HSBC China economist Qu Hiongbin said.
"Although neither tightening nor loosening is expected in the coming months, authorities may continue to check shadow (bank) lending".
The Australian dollar dipped below US96 cents on the China uncertainty, while government 10-year yields ease 2.5 points to 3.963 per cent.
Gold bounced $US15 to $US1350, before slipping back to $US1345/oz, while copper slipped 0.2 per cent to $US7180 a tonne.
A positive mood among investors came after better than expected quarterly earnings from US companies overnight including Ford, 3M and Microsoft.
CMC Markets chief market analyst Ric Spooner said he thought weakness in Asia might have led to some profit taking on the local market.
“I think people have put the US debt ceiling crisis behind them and those investors not in the market don’t want to miss out and want to achieve some decent yields against the background of lower rates,” he said.
The banks made solid gains, with National Australia Bank the best performer, up 49 cents, or 1.4 per cent, at $36.08.
Commonwealth Bank gained 70 cents to $76.28, ANZ added 29 cents to $32.66, and Westpac was 18 cents higher $34.36.
In the resources sector, BHP Billiton gained 6 cents to $37.41, Rio Tinto dropped eight cents to $63.77 and Fortescue Metals Group gave up early gains to shed nine cents to $5.21.
Whitehaven Coal added 3.5 cents to $1.77 after lifting coal sales by 26 per cent in the September quarter.
Rail and stevedore operator Asciano slumped 31 cents, or five per cent, to $5.90 after it warned earnings growth would be weaker in the 2013/14 financial year.
Warrnambool Cheese and Butter shares gained 27 cents to $8.42 after Canadian diary giant Saputo raised its takeover offer to $449 million, trumping two rival bids from local food companies.
The broader All Ordinaries index was up 12 points, or 0.22 per cent, at 5,385.7 points.
The December share price index futures contract was up 15 points at 5,385 points, with 19,024 contracts traded.National turnover was 2.16 billion securities worth $5.95 billion.