THE Australian sharemarket has closed slightly higher after a firm finish by United States markets on Friday.
On Monday, the benchmark S&P/ASX 200 Index was up 6.3 points, or 0.13 per cent, at 4777.5 points, and the broader All Ordinaries Index was 7.5 points, or 0.16 per cent, higher at 4802.2 points. On the ASX 24, the March share price index futures contract lifted three points to 4743 points, with 15,180 contracts traded.
CMC Markets chief market analyst Ric Spooner said the local market was exhibiting a firm tone given the stronger US market and reflected the relentless rallying experienced over the last 2½ months.
"Today [Monday] I think the market has just centrally positioned itself prior to tomorrow's Bank of Japan meeting," Mr Spooner said.
It was generally expected that the Bank of Japan would set an inflation target of 2 per cent, and meeting this target would require substantial economic stimulus, he said. This would be supportive for world growth in general and the Asian region in particular.
Tokyo stocks closed 1.52 per cent lower as the Bank of Japan begins a two-day policy meeting. The benchmark Nikkei 225 Index ended 165.56 points lower at 10,747.74, while the Topix Index of all first-section shares fell 0.69 per cent, or 6.28 points, to 905.16.
The ASX rallied to a 33-month high at the end of last week.
Mr Spooner said there was little happening in Australia until the release of inflation figures on Wednesday.
The official inflation figures could prove the final trigger for another interest rate cut when the Reserve Bank holds its first board meeting of the year on February 5.
But the building industry believes it will take more than another rate reduction to lift the sector out of the doldrums and help it fill the vacuum left by the mining boom coming off the boil.
Master Builders Australia's national survey of building and construction, released on Monday, shows industry conditions deteriorated in the December quarter 2012, despite 175 basis points of rate reductions since November 2011.
"Interest rate cuts over the past year appear to have failed to boost the confidence of new home buyers," Master Builders Australia's chief economist Peter Jones said.
Economists' forecasts for Wednesday's December-quarter consumer price index centre on a modest 0.4 per cent rise after the surprise 1.4 per cent jump in the previous three months.
This would see the annual inflation rate at 2.4 per cent, comfortably within the RBA's 2 to 3 per cent target band.
More crucial to the interest rate outlook, underlying inflation is forecast to rise 0.7 per cent in the quarter for an annual rate also at 2.4 per cent.
National Australia Bank's chief economist for markets, Rob Henderson, believes such an outcome may not be enough for a rate cut in February.
"[But] we reckon 0.6 per cent or lower brings a February rate cut into contention - 0.5 per cent and they almost have to go," Mr Henderson said.
On the local market, among the major banks, the National Australia Bank added 50¢ to $26.85 amid speculation that Spanish banking giant Santander was considering making a $3 billion bid for NAB's UK business.
The Commonwealth Bank dumped 26¢ to $62.20, Westpac lost 11¢ to $26.48, and ANZ gained 10¢ to $25.69.
Elsewhere in the financial services sector, shares in global insurer QBE rose 39¢ to $12.14 amid speculation it could axe 700 jobs to reduce costs.
In the resources sector, global miner BHP Billiton firmed 4¢ to $36.54 ahead of the release of fourth-quarter earnings results later this week. Rio Tinto lifted 10¢ to $66.45.
Gold producer Perseus sagged 8.5¢ to $1.955 after it said that managing director Mark Calderwood would step down after nine years at the helm.
Among other companies, recycler Sims Metal Management dived 50¢, or 5.01 per cent, to $9.48, after the company warned that fraud may have occurred at two of the group's electronics recycling sites in Britain.
Wesfarmers shares were down 3¢, or 0.08 per cent, at $37.72. Wesfarmers Insurance managing director Rob Scott will become finance director of the company's key supermarket arm, Coles.
QBE Insurance Group was up 39¢, or 3.3 per cent, at $12.14. Hundreds of jobs are under threat at the lobal insurer, as it prepares to finalise a massive cost cutting plan.
The price of gold in Sydney was $US1690.11 per fine ounce, down $US1.54 on Friday's closing price of $US1691.65.