The market has closed firmer. Picture: AP.
The market has closed firmer. Picture: AP.

The Australian sharemarket shrugged off weakness in Chinese stocks and increasing Russian aggression in Ukraine to erase early losses, but the Reserve Bank’s tentative domestic growth outlook failed to keep stocks at the day’s high.

European stocks slumped over 3 per cent on average last night and the S&P 500 lost 0.7 per cent, but the S&P/ASX index bounced to close 15.9 points, or 0.29 per cent, up at 5400.2 as the Reserve retained its neutral rate outlook.

Reserve Governor Glenn Stevens said that consumer demand was getting slightly better and there were signs that the housing construction sector was improving, but he noted resources sector investment spending was set to decline significantly and, “at this stage, signs of improvement in investment intentions in other sectors are only tentative”.

The Australian dollar slipped US0.2¢ to US89.25¢ after the statement said it was “high by historical standards”, suggesting the Reserve was aiming for a weaker currency.

The Shanghai composite index was off 0.8 per cent at the close of the ASX after the People’s Bank of China drained $9 billion from the banking system via a 28-day repo, the longest duration it has used in eight months.

In Tokyo the Nikkei index was up 0.5 per cent.

The ANZ global lead indicator continued to soften in February, “unusually” diverging from buoyant developed market risk appetite.

“The issue is to gauge the depth and duration of the US inventory cycle and whether this eventually swamps central bank support and drives both US yields and equities sharply lower,” ANZ credit strategist Kerry Duce said.

Gold rose $US4 to $US1350, copper was little changed at $US6970 a tonne and spot iron ore lost 0.3 per cent to $US117.70 a tonne.

Brent crude oil was steady at $US111.20 a barrel, while the Russian rouble fell 2 per cent as the Russian central bank hiked rates 1.5 per cent to stem the outflow of cash.

“This (falling rouble) has broader implications, as other vulnerable markets react to their own idiosyncratic issues, and higher volatility can create demand for US dollar,” National Australia Bank currency strategist Emma Lawson said.

“This tends to have a negative effect on the … Australian dollar. Interestingly, it has so far held in surprisingly well. We are cautious as to why.”

OptionsXpress market analyst Ben Le Brun said the market on Tuesday had a nice bounce back after the possibility of deeper conflict in Ukraine’s Crimea region had sparked a sell-off on Monday.

"There’s possibly a bit of bargain-hunting going on today,” Mr Le Brun said.

"We had a chance to react to the negative news (about Crimea) yesterday (Monday).

"There’s probably some relief that the Crimea crisis has not got any worse."

Mr Le Brun said Australian investors may believe that the Crimea crisis is more of a problem for Europe given that Australian actress Cate Blanchett’s Oscar win seemed to be getting just as much attention.

Mr Le Brun said a bounce-back on other markets in the region may have also encouraged local investors.

The local market was led higher by the major banks.

The Commonwealth bank lifted 45 cents to $74.93, National Australia Bank rose 18 cents to $34.73, Westpac improved 34 cents to $33.65, and ANZ advanced 23 cents to $32.18.

In the resources sector, global miner BHP Billiton eased four cents to $37.36, Rio Tinto edged up four cents to $65.83, and Fortescue Metals dipped two cents to $5.33.

Airline Qantas was 1.5 cents lower at $1.135 in the wake of news that the Abbott Government will seek to repeal foreign ownership restrictions on the airline.

Toys, clothing, confectionery and film distributor Funtastic fell three cents to 12 cents as it said it was set to sell its film and television distribution business, Madman Entertainment, and warned of lower first-half earnings.

AGL Energy was off 38 cents at $15.05 after Australia’s consumer watchdog said it will oppose its planned takeover of two NSW government-owned power stations.

The broader All Ordinaries index was up 14.3 points, or 0.26 per cent, at 5411.7 points.

The March share price index futures contract was up nine points at 5398 points, with 24,904 contracts traded.

National turnover was 1.54 billion securities worth $3.64 billion.

The West Australian

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