Analysts said the near-term direction for stocks hinged on the US budget talks which are due to resume on Sunday, amid hopes the two sides could avert the 'fiscal cliff' that risks tipping the US economy back into recession. Investors are taking the view that the United States, like Europe earlier this year, will take steps to avoid a disaster or at least postpone it.
"A big issue is being made of it, but eventually they'll do something to kick the can down the road," said Steven Robinson, senior investment manager at Alleron Investment Management in Sydney. The benchmark S&P/ASX 200 index rose 23.3 points, or 0.5 percent to close at 4,671.3, according to the latest data, its highest close since June 2, 2011. New Zealand's benchmark NZX 50 index rose 0.4 percent to finish at 4,080.9.
Miners were supported by robust gains in spot iron ore prices, which have climbed to eight-month highs at $139.40. Mining giant BHP Billiton rose 1.1 percent, while Rio Tinto gained 1.7 percent. Pure play iron ore miners put on stronger gains, with Fortescue Metals and Atlas Iron up more than 2 percent and BC Iron climbing 5.8 percent.