(Adds analysis, quotes, stocks on the move)
SYDNEY Dec 17 Australian shares rose 0.7
percent on Tuesday, bouncing back from 3-1/2 month lows as Wall
Street gained overnight, but investors remained cautious ahead
of an upcoming Federal Reserve policy meeting.
U.S. stocks gained overnight, rebounding from their worst
week in months as large deals boosted optimism, bolstering local
The financial sector underpinned the market with Australia
and New Zealand Banking Group jumping 1.8 percent,
while Westpac Banking Corp added 1.5 percent.
The S&P/ASX 200 index climbed 39.8 points, its
biggest one-day gain in four weeks to 5,129.4.
The benchmark slipped 0.2 percent on Monday and has taken a
beating in recent weeks, having fallen some 350 points from a
5-1/2 year high of 5,457.3 hit on Oct. 28 as profit forecast
downgrades and fears over early Fed tapering hit local
"With signs of recovery worldwide and stronger economic
data, optimism has seemingly returned ahead of the key U.S.
Federal Reserve decision due later this week," said Tracey
Warren, business development manager at CMC Markets
Australia's central bank on Tuesday said there were signs
that past cuts in interest rates are working to stimulate the
economy, though it again would not rule out the chance of easing
further if needed.
An uptick among in resource stocks also lifted the market as
copper hit its highest in nearly two months. World no.4 iron ore
miner Fortescue Metals Group rallied 3.2 percent while
heavyweights BHP Billiton Ltd and Rio Tinto Ltd
added 0.6 percent and 0.9 percent respectively.
A handful of defensives also gained, with consumer staple
retailer Wesfarmers Ltd jumping 1.6 percent and
telecommunications provider Telstra Corporation Ltd
rising 0.3 percent.
Insurance Australia Group shares dropped 4.1
percent to five-month lows of A$5.47 after it raised A$1.2
billion through an institutional equity placement to fund its
purchase of Wesfarmers insurance underwriting businesses.
Later in the day, Australia's Treasurer Joe Hockey is likely
to unveil a 2013/14 budget deficit of close to A$40 billion, a
significant increase on the May budget largely due to an
injection of funds to the Reserve Bank of Australia, while the
national debt is set to peak above A$400 billion.
Elsewhere, Tellus Resources Ltd gained 2.8 percent
after it signed a participation agreement with a private U.S.
company, gaining rights to acquire up to 83 percent interest and
operatorship in a Utah oil play known as the Covenant Mondo
Pact Group Holdings Ltd, which will begin trading
later in the day, said its issue of about 170.7 million shares
at an issue price of A$3.80 has been completed.
New Zealand's benchmark NZX 50 index slipped 0.3
percent to 4,721.2.
(Reporting by Thuy Ong; Editing by Eric Meijer)