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ASX closes firmer as rates kept on hold
ASX closes firmer as rates kept on hold

The Australian sharemarket closed in the black after the Reserve Bank left the official cash rate on hold at 3.25 per cent, sending the Australian dollar sharply higher, as the upbeat outlook buoyed sentiment.

The S&P/ASX 200 index gained 10.7 points, or 0.24 per cent, to 4484.8 points on low volume after the Reserve said easier monetary policy was starting to work into the economy, with the full effect yet to be felt, although another a sharp fall in Chinese stocks kept a lid on sentiment.

“More steady global conditions and slightly higher than expected prices data were enough to see them sit still,” HSBC chief economist Paul Bloxham said.

“We could be quite the near the end of the RBA’s cutting phase, though, for the moment, we still have one more cut pencilled in before they are done.”

However, presenting a strong headwind for exporters and the domestic economy, the dollar jumped 0.7 per cent to $US1.0430, shrugging off the Reserve’s comments that it remained “higher than might be expected given the observed decline in export prices”.

The Shanghai composite index was off 1.5 per cent at the close of the ASX ahead of the looming leadership change and industrial production data on Friday that could confirm the gloomy growth outlook.

Japan’s Nikkei index was off 0.5 per cent.

Overnight the US S&P 500 index finished 0.2 per cent up as the presidential election uncertainty and fresh eurozone jitters from Greece’s austerity budget vote kept investors on the sidlines.

“Opinions continue to differ on whether an Obama victory is good or bad for stocks and bonds and as a result the USD,” National Australia Bank global head of interest rate strategy Ray Attrill said.

“We retain the view risk markets will initially be cheered should Obama retain the white House (partly because of its Fed policy connotations) and that the knee jerk US dollar reaction will be negative. Reasonable people differ on this, which simply adds to the sense of uncertainty ahead of tonight’s plebiscite.”

The broader All Ordinaries index was up 10.2 points, or 0.23 per cent, at 4,503.8.

On the ASX 24, the December share price index futures contract was 17 points higher at 4475, with 18,644 contracts traded.

IG Markets analyst Stan Shamu said market players around the world had put their investment decisions on hold until the outcome of tonight’s US Presidential election was decided.

"It’s a close call and investors would rather react than try to predict any outcome from the elections which is why we’re flat on the major markets,” he said.

"We’ve seen a fairly flat session across the region."

Local investors believe they may have to wait until next year for another interest rate unless conditions deteriorate on a global scale.

Australian stocks started in the red, but improved throughout the day on the back of a gains in the financial and materials sectors.

Westpac was up 22 cents at $25.57, extending gains from Monday when the bank reported a lift in full year cash earnings.

ANZ rose nine cents to $25.25, CBA was up eight cents to $57.48 and NAB advanced 21 cents to $25.05.

Mining heavyweight Rio Tinto posted a 62 cent gain to $59.50 while rival BHP Billiton fell one cent to $34.81.

Trading volumes were low, with national turnover at one billion securities worth $2.5 billion, with 422 stocks up, 408 down and 371 unchanged.