Stocks pare gains, US rates eyed

The local sharemarket has closed firmly in the black despite checking earlier optimism.

The Australian sharemarket has finished higher for a third day despite fading into the close.

At the end of trade, the benchmark S&P/ASX 200 index rose 16.1 points, or 0.3 per cent, to 5,353.2, while the broader All Ordinaries index lifted 15.7 points, or 0.27 per cent, to 5,433.2.

Stocks traded up as much as 1 per cent around lunchtime, boosted by a positive offshore lead and strong business confidence data at home.

However, traders showed signs of nerves in late trade ahead of the release of key economic numbers later in the week and renewed talk of US rate hikes.

“Local investors are likely to dance to an international beat this week,” CMC Markets chief market strategist Michael McCarthy said.

“Other than employment numbers on Thursday there is little to drive local markets. This contrasts directly with the international outlook, with major data expected from China, Japan and the US this week, as well as the start of the US corporate reporting season.

“Caution ahead of so many potentially game-changing reads may be driving … low volumes.”

Macquarie analysts said the recent rally had been encouraging, but remained unconvinced range bound trading was behind the market.

“We don’t think this signals the start of a sustained period of equity performance (either absolute or relative) and our view to remain cautious and defensively positioned is unchanged,” the group’s analysts said in a note, adding the market had been range bound for a year.

At the heart of this week’s rally has been the financial sector, with the banks winning support after a sustained period of selling from investors.

ANZ again led the way, jumping 1.2 per cent to $24.20, while Commonwealth Bank added 0.54 per cent to $74.50, NAB advanced 0.48 per cent to $25.11 and Westpac tacked on 0.65 per cent to $29.38.

In mining, BHP Billiton climbed 1.7 per cent to $19.93, while rival Rio Tinto bucked the trend to edge down 0.24 per cent to $49.40.

Iron ore miner Fortescue surged 2.5 per cent to a near two-year high of $4.17.

In energy, Santos slumped 2.3 per cent to $4.70 after crude prices fell during offshore trade, while Woodside inched up 0.15 per cent to $26.80.

Meanwhile, Telstra closed flat at $5.67, while Qantas bounded 3.2 per cent higher to $2.93.

The Australian dollar traded at US75.95c at the end of local trade, rising US0.5c through the session on the release of a business survey that showed conditions equalled the highest point since the GFC.