Banks dip but BHP takes index higher

The Australian economy used to "ride on the sheep's back" but yesterday the bellwether was the world's largest mining company, BHP Billiton.

The S&P/ASX Index rose a meek 6.5 points to close at 4778.4. The banks shaved off value but the index was held up by BHP Billiton, which rose 40? to $45.82 with stronger commodity prices.

"BHP is the biggest stock on the market, worth almost 10 per cent of the whole market, so whatever happens with BHP, so happens with the market," said Austock senior client adviser and strategist Michael Heffernan.

He said the minutes of the Reserve Bank's most recent meeting, released on Tuesday, should have pushed the banks up, because it appeared interest rates would hold steady for a while. But the banks had done well recently and were "having a bit of a rest".

Mr Heffernan said the day's low turnover was similar to last year's figures, and he would not quibble over the day's rise. "Give me an increase any day. Out of the top 20 stocks, most of those are in the green, so it's not a bad day."

The dollar rose to record highs against the euro as Portugal and Greece were issued downgrade warnings. It also rose against the greenback, closing at US99.72?.

Mr Heffernan said: "We are back to where we were a month ago when the US started their second round of quantitative easing [stimulus]."

He said the Aussie would weaken next year as the US economy gathered momentum. "The stronger economy will outweigh the fact that they are pumping money out into the community."

Patersons Securities associate director John Curtin said options were expiring today, which "should be interesting".

"That might create a little bit of volatility and price action more so than normal, because if the market stays this thin, stocks can push around a little bit easier."