The Dow Jones Industrial Average unexpectedly rose above the level of 18,000 for the first time, after US growth figures came in much stronger than expected.

The Australian market was late in adopting the Christmas cheer with the benchmark All Ordinaries index falling on the open then rising 0.25 per cent to 5369.5 and the S&P/ASX 200 up a similar amount to 5394.5.

The Australian dollar dropped sharply in response due to a steep rise in the greenback, falling below US81c but has since rebounded to US81.11c.

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The rally was led by Wesfarmers which ended almost 1 per cent higher, Woolworths added 0.3 per cent but Myer retreated 0.7 per cent.

The strong US growth figures overnight sparked a rally in the oil price – West Texas crude added around $US4 overnight to around $US56.73 a barrel.

Tapis crude was edging higher in Asian trade at $US62.80 a barrel.

That helped local oil and gas producer Woodside rise 0.5 per cent, but Santos remained unchanged.

A sharp fall in the iron ore price to a fresh five-year low of $US65.60 failed to drag on BHP Billiton and Rio Tinto – they put on 0.6 and 1.4 per cent respectively.

Fortescue went down 0.4 per cent though.

The banks weighed at the beginning of trade, but mostly turned around before the close – the Commonwealth finished 0.1 per cent lower.

Westpac and ANZ rose just under half a per cent, while NAB gained 1 per cent.

The gold price failed to recover from yesterday’s big fall and was trading at $US1,177 an ounce.

The Dow Jones Industrial Average closed 0.4 per cent higher at 18,024, and the much broader S&P 500 added 0.2 per cent to 2,082.

Revised figures from the Commerce Department revealed the US economy grew at 5 per cent over the year to the third quarter, which is its quickest pace in 11 years and the strongest sign yet that growth has decisively shifted into higher gear.

To put it in perspective, Australia grew by 2.7 per cent over the same period.

Australian shares are expected to rise after taking a lead from the US.

The Commerce Department cited stronger consumer and business spending than previously calculated.

The oil price rise came despite  OPEC saying it won’t cut production even if the oil price drops to $US20 a barrel and claimed it’s unfair to expect the cartel to reduce output if non-members don’t.

Nymex, the US one-month contract, rallied 3 per cent to $US56.95.

Across the Atlantic, markets posted fairly good gains despite the prospect of early elections in Greece that could jeopardise the country’s bailout.

The Eurostoxx rose 1 per cent and London’s FTSE 100 added 0.3 per cent.

The Russian crisis continues with Moscow ordering  state-controlled exporters to sell part of their foreign currency holdings, a move which could marshall some $US50 billion ($A54 billion) to support the sagging rouble.

A key spot iron ore price dropped very sharply overnight to $US65.60 a tonne, which is almost a record low.