Australia shares end at 2-month high in Xmas rally

By Morag MacKinnon

SYDNEY, Dec 24 (Reuters) - Australian stocks rose for a third day on Thursday to close at a two-month high, driven by resource and banking stocks, with the Christmas rally seen auguring well for the market in the coming year.

Traders said sentiment was positive that the rally could continue into early January, with a better economic outlook for the United States helping.

'We're having a little Christmas rally,' said Bill Bishop, a private client advisor at RBS Morgans.

'It looks so different from this time last year, and the year before for that matter, when we were looking over the precipice both times.'

'The road ahead is not clear and there's a few potholes ahead, but I really think the Americans are setting themselves up for a little bit of growth next year.'

The benchmark S&P/ASX 200 index closed up 1.1 percent at 4,790.9, the highest close since Oct 26. New Zealand's benchmark NZX 50 index ended 0.14 percent lower at 3,205.20.

Trading ended two hours earlier than normal for the Christmas holidays. Australian and New Zealand stocks will resume trading on Dec. 29.

Resources stocks did well after oil, metals and gold prices booked solid gains, with BHP Billiton up 1.3 percent to A$42.47 and Rio Tinto up 0.3 percent to A$73.50. Gold miner Newmont Mining rose 2.6 percent to A$5.45.

Australia's largest four banks, which account for more than a fifth of the benchmark stock index, rose after announcing they had struck an agreement to pay around $1.5 billion to New Zealand tax authorities to settle a long-running dispute.

Westpac Banking Corp, which had the largest tax bill, rose 2.9 percent to A$25.39. National Australia Bank Ltd added 1.25 percent to A$26.70 while Australia and New Zealand Banking Corp rose 3.1 percent to A$22.39.

Commonwealth Bank of Australia rose 1.6 percent to A$53.87.

Macquarie Group rose 1.2 percent to A$48.00 after it said it will acquire the derivatives business of private bank Sal. Oppenheim, helping to boost its presence in Europe.

Warrnambool Cheese & Butter Factory Co. surged for a second day after it confirmed on Wednesday that it had received an unsolicited a takeover offer. Warrnambool shares closed up 23.7 percent at A$3.40.

RBS Morgan's Bishop said that the stock market would likely book a slow and steady rally into early January.
(Editing by Jonathan Standing)
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