Australian shares advanced ahead of the long weekend, climbing for an eighth straight session and touching a 21-month high on positive economic news from top trading partners.

The benchmark S&P/ASX 200 index closed up 25 points at 4835.2, while the broader All Ords added 25.1 points, or 0.5 per cent, to 4858.9, with volumes heavy in options-related trading.

It was the ASX200's best close since April 28, 2011. Australian markets will be closed on Monday for the Australia Day holiday.

Among the sectors, financials pushed up 0.8 per cent, consumer discretionary jumped 0.7 per cent, while consumer staples and telecommunications both added 0.5 per cent. Materials and gold miners bucked the trend, down 0.4 per cent and 1.6 per cent respectively.

For the week, the market scored a gain of 1.3 per cent, boosted by solid China and US manufacturing data and moves by Japanese policymakers to reflate their economy. The benchmark has risen 3.8 per cent so far in January.

"The PMI indicators from the US, Europe and China should serve to keep markets tracking higher," said CMC Markets senior trader Tim Waterer.

Karoon Gas Australia leapt 14 per cent to $6.15 after it said it had found oil at its Kangaroo-1 well off the coast of Brazil.

Shares in contractor Macmahon Holdings ended down 3.6 per cent at 27 cents. Macmahon said it may face a problem at Mongolia's giant Tavan Tolgoi coal mine after April, if its client Erdenes Tavan Tolgoi does not sort out funding difficulties.

Shares in retailer Specialty Fashion Group surged 38.6 per cent to A$0.97 after the company forecast its first-half net profit would nearly triple - a rare earnings upgrade for the battered retail sector. The company is due to report results on February 18.

Healthcare firm ResMed , which makes products to treat sleep disorders, saw its shares jump 7 per cent to $4.58 after second-quarter net profit rose 24 per cent, with revenue up 13 per cent on US and European demand.

Linc Energy's dream run came to an end: after posting gains or 12.7 per cent and 32.9 per cent in the two previous sessions, the energy company finished down 13.1 per cent today, despite being up by 12 per cent earlier in the day.

Reuters