THE local sharemarket has closed higher on the back of a positive lead from the United States and the prospect of a cut to interest rates.
The benchmark S&P/ASX 200 Index rose 38.3 points, or 0.78 per cent, to 4921, while the broader All Ordinaries was up 37.9 points, or 0.77 per cent, at 4940.5.
On Wall Street on Tuesday, the Dow Jones rose 0.7 per cent to 13,979.30 points, following data showing the US services sector continued to expand in January.
Local data released on Wednesday showed that retail spending in Australia had fallen for three consecutive months, a sign that rising unemployment was weighing on consumer confidence.
Retail trade was down 0.2 per cent in December, seasonally adjusted, well below expectations of 0.3 per cent rise for the month.
"I think we've basically followed on from the sentiment in the US," CMC Markets analyst Ric Spooner said. "Retail sales figures here [in Australia] were weak, but in a phase where the market wants to be optimistic, I think that's being parlayed into optimism on the increasing prospect of a rate cut."
Among the major banks, NAB advanced 32¢ to $28.11, Westpac climbed 21¢ to $28.13, ANZ gained 39¢ at $27.03, and Commonwealth Bank rose 33¢ to $64.63.
In the resources sector, global miner BHP Billiton firmed 34¢ at $37.52 as it met workers in Adelaide to announce some redundancies as part of efforts to slash costs. Rio Tinto picked up 75¢ at $68.08.
Among other stocks, medical centre owner Primary Health Care was steady at $4.49 as it lifted its first-half profit by 50 per cent and forecast a rise in full-year earnings of up to 8 per cent. Online real estate advertiser REA Group was 71¢ higher at $21.71 after it lifted its first-half profit by 25 per cent.
Streetwear company Globe International was untraded at 45¢ as its directors were re-elected at a board spill meeting in Melbourne.
Meanwhile, three-year bond futures prices rose after the weak retail trade figures left scope for more interest rate cuts.
The March three-year bond futures contract was at 97.16 (2.84 per cent), up from 97.15 (2.85 per cent). The 10-year contract was trading at 96.5 (implying a yield of 3.5 per cent), down from 96.53 (3.47 per cent).
CMC Markets strategist Michael McCarthy said local bond markets reacted sharply to the retail spending data.
"I'd be very surprised if the Reserve Bank took that as game-changing evidence for the need for a rate cut, but I note that the market has," Mr McCarthy said.
"There's clearly still a focus on that potential for a rate cut and that's got the short-end [three-year bonds] a little bit concerned."
Mr McCarthy said 10-year bond futures prices rose on the back of better growth prospects as the global economy improves.