Australia's sharemarket has managed to hold on to its five-year highs after the Reserve Bank left the door slightly open for more interest rate cuts.
The ASX opened softly, but rebounded after the RBA released minutes from its September meeting which said while another interest rate cut was possible, it was not imminent. Investors interpreted that as the central bank keeping its foot on the easing pedal, which would further support the equities market.
The benchmark S&P/ASX 200 Index edged 3.2 points, or 0.06 per cent, higher to 5251.2, while the broader All Ordinaries firmed 3.5 points, or 0.07 per cent, to 5245.2.
Financial stocks led the turnaround, with the sector strengthening 0.6 per cent. The biggest company on the ASX, Commonwealth Bank, rose 0.6 per cent to $73.60. NAB advanced 1.7 per cent to $34.68.
But gains across the broader market were limited, as the US Federal Reserve prepared to decide the future of its $US85 billion-a-month stimulus program. Gold stocks were undecided if the Fed would begin trimming the stimulus, which has resulted in bullion rising 70 per cent from December 2008 to June 2011 as the US central bank pumped more than $US2 trillion into the financial system by buying debt.
Spot gold rose 0.03 per cent to $US1313.76 an ounce, after falling 1 per cent in the previous session to a five-week low of $US1303.85. The modest gain brought little joy to gold miners. Australia's biggest listed producer, Newcrest, tumbled 2.3 per cent to $12.34. Kingsgate slid 4.8 per cent to $1.70, while St Barbara, the ASX's worst performer, fell 9 per cent to 55.5¢.
"Everyone is just holding their breath about what is going to happen in the US," Baillieu Holst equity partner Richard Morrow said. "Larry Summers pulling out of the race for the Fed chairmanship has wrong-footed a few players."
Equity Trustees chief investment officer George Boubouras said the Fed's policy meeting was the "challenge for the week," saying "I believe they must maintain all mortgage-backed security buying in the market every month and taper off on the government bonds, therefore still being supportive of the US housing-led recovery."
Bigger miners finished lower after Chinese steel futures fell on Monday, hitting their lowest in more than six weeks.
TPG Telecom was one of the day's best performers, gaining 14.3 per cent to $4.23.