Global market tensions eased and the Australian sharemarket climbed firmly into the black after US President Barack Obama deferred a decision for a military strike on Syria to the US Congress on September 9.
The S&P/ASX 200 index opened in the red but jumped straight back into the black to close 53.3 points, or 1.04 per cent, up at 5188.3 points, with improved Chinese PMI manufacturing data supporting sentiment.
The Australian dollar also jumped 0.7¢ to US89.70¢ after the HSBC Purchasing PMI index rose to 50.1 points in August from an 11-month low of 47.7 in July, signalling that operating conditions were relatively unchanged from the previous month.
The Shanghai composite index was up 0.2 per cent at the close of the ASX, while in Tokyo the Nikkei index climbed 1.4 per cent.
Oil dropped $US2 to $US112 as the risk of a flare-up of Middle-East conflict was pushed out at least one week.
Equity markets shrugged off the jump in global borrowing costs and the looming prospect of the US Federal Reserve announcing plans to taper its bond purchasing plan in two weeks.
US 10-year yields climbed 4 points to 2.78 per cent, just shy of the two-year high of 2.92 per cent, while Australian 10-years rose 5.4 points to 3.95 per cent.
The Reserve Bank board meeting tomorrow is not expected to deliver further relief for the economy ahead of the election, despite the ABS business indictors underscoring the continuing loss of domestic growth momentum.
On Friday conflicting US data clouded the outlook for Fed action, with the consumer spending falling but consumer sentiment improving.
Emerging markets were mostly stable, although after outperforming on Friday the Jakarta composite index was down more than 2 per cent today. India’s BSE Sensex index bounced 0.9 per cent in early trade.
Gold fell $US15 to $US1380 an ounce before bouncing to $US1392 an ounce, while copper reversed last week’s weakness with a 1.8 per cent bounce to $US7226 a tonne on the firmer Chinese data.
The broader All Ordinaries index was up 52.7 points, or 1.03 per cent, at 5178.0.On the ASX 24, the September share price index futures contract was 66 points higher at 5184, with 28,793 contracts traded.
“The data’s certainly helping and the potential for a strike in Syria is receding with Obama’s decision to refer any action to Congress,” CMC Markets strategist Michael McCarthy said.
HSBC’s purchasing managers’ index rebounded to 50.1 in August, indicating the industry’s first month of expansion since April.
The market was also assisted by strong building approvals data and figures showing inflation remains contained.
“Those things have come together today against the backdrop of an overall tick for corporate Australia from reporting season,” Mr McCarthy said.
More important economic data is due to be released later this week, with Australian gross domestic product figures coming on Wednesday.
Almost all sectors of the market rose today.
In financials, National Australia Bank gained 40 cents to $32.85, ANZ added 31 cents to $30.00, Westpac climbed 43 cents to $31.82 and Commonwealth Bank was 84 cents higher at $73.68.
But AMP shares dropped five cents to $4.69 after announcing it will establish a joint venture funds management company in China.
In the resources sector, BHP Billiton was 13 cents lower at $35.62 after paying out its final dividend for the 2012/13 financial year.
Rio Tinto gained 92 cents to $59.22 and iron ore miner Fortescue Metals was flat at $4.33, also after paying its dividend.
National turnover was 1.6 billion securities worth $4.4 billion.