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The Australian sharemarket is higher mid-morning.
The West Australian The Australian sharemarket is higher mid-morning.

The Australian sharemarket shrugged off the Reserve Bank's GDP growth downgrade and the European Central Bank's downbeat outlook on the eurozone to finish at a fresh 22-month high, with sentiment given a mid-session boost by Chinese trade data.

Following overnight weakness in the US and Europe, the S&P/ASX 200 index opened in the red, but as investor attention switched to lagging mining stocks it rallied to close 35.6 points, or 0.72 per cent, at 4971.3 points.

The Reserve downgraded its 2013 growth forecast to 2.5 per cent from 3 per cent, blaming the strong Australian dollar, an earlier than expected peak in mining investment and the lack of response from the non-mining sector to interest rate stimulus.

Royal Bank of Scotland currency strategist Greg Gibbs said the Reserve noted the improvement in the global environment, particularly in China and the US as limiting the down side risks to their forecasts.

"As such they appear willing to sit a bit longer in wait and see mode, barring a significant deterioration in global or domestic conditions.

However, they are far from sanguine about Europe, not nearly as convinced as the brave face the Euro leaders have been putting on their situation. The RBA still see this as a big threat to the global environment.

The Australian dollar extended overnight losses in line with euro weakness, hitting a low of $US1.0255 after the Reserve statement, before bouncing to $US1.0290 on the Chinese data.

Bouncing back from the December slowdown, Chinese imports surged 25 per cent and exports climbed per cent year-on-year in January, although the data was distorted because the Lunar New Year holiday week was in January last year.

Overnight the euro and tumbled after the ECB left interest rates on hold and ECB president Mario Draghi said the strong euro would dampen inflation, opening up the possibility for rate cuts later this year.

However, signalling ongoing jitters over the dire state of peripheral countries Span and Italy, government bond yields climbed to four month highs and just German equities remaining in the black.

The US S&P 500 index finished 0.2 per cent down as weekly jobless claims missed forecasts and consumer credit increased more than expected on the back of a surge in student loans.

The Shanghai composite index was up 0.3 per cent at the close of the ASX and Japan's Nikkei index was down 1.3 per cent.

More to come…