The sharemarket ended flat yesterday as companies with offshore earnings and high-yield stocks returned to favour, offsetting weak demand for resources.
Investors' recent enthusiasm for resources was dampened by further declines in commodities as the US dollar extended Friday's gains against the local currency. But the sector brushed aside slightly weaker-than-expected economic data from China.
The benchmark S&P/ASX 200 closed up four points at 5210.3, its highest close since June 2008.
Share trading value rose to $6 billion, well up on the 20-day moving average of $4.2bn.
The index, which hit a five-year high of 5242.5 on Friday, proved resilient to ex-dividend falls in Westpac and Macquarie Group.
Westpac fell $1.05, or 3.2 per cent, to $31.80 after going ex-dividend a total of 96c, while Macquarie fell 49c, or 1.1 per cent, to $45.48 after going ex-dividend $1.25.
"It's a good performance considering the ex-dividend falls," Macquarie Private Wealth investment adviser James Rosenberg said.
"It's a combination of record highs in some markets, notably US equities, and the Aussie dollar weakening."
Westfield, News Corporation, QBE Insurance, Brambles and Resmed rose between 0.4 per cent and 3.4 per cent, benefiting from a weaker dollar.
Mr Rosenberg said valuations were "looking stretched" in some sectors of the market, notably banks, but there was still "huge demand for high-yield stocks", which Macquarie expects to be fuelled by further domestic interest rate cuts.
BHP Billiton, Rio Tinto, Newcrest Mining, Fortescue Metals and Atlas Iron fell between 0.6 per cent and 4 per cent after commodities weakened on Friday.
In late trading, resources stocks pared some of the day's declines as economic data from China came in strong enough to avoid more selling.
China's April industrial production rose 9.3 per cent year on year, when a figure of 9.5 per cent had been expected, while non-rural fixed assets investment rose 20.6 per cent, versus an expected 21 per cent increase.
Investors were awaiting the release last night of US retail sales data, while keeping an eye on the US dollar and commodity prices after an article in The Wall Street Journal said the Federal Reserve had mapped out a strategy for winding down its bond-buying program.
Concern about the end of US quantitative easing could trigger a 5-10 per cent fall in the S&P 500 over the next few weeks, a potential outcome that might also weigh on Australian equities in the short term, said Nader Naeimi, who helps manage investments worth about $126bn at AMP Capital Investors in Sydney.
"Any news on that front could create some volatility and a short-term correction in equities," Mr Naeimi said.
"Apart from that, I don't think the idea of the Fed tapering its quantitative easing some time in the future should be a surprise to the market. The US does not have an inflation problem and growth isn't so good that the Fed can wind back its stimulus just yet."