The share market recouped yesterday's losses as strong economic data pointed to healthy GDP data tomorrow and most Asian markets rebounded this morning.
At lunchtime the ASX 200 was 76 points or 1.5% ahead at 5086 as retail stocks benefitted from unexpectedly bright January sales and the big banks extended recent gains. Financials and consumer staples both rallied 2.3%, consumer discretionary stocks 1.8% and the Small Ordinaries 1.2%. Utilities -0.8% and gold -0.3% were the only sectors to lose ground.
The odds on a rate cut this afternoon slumped to 11% after retail sales and current account data exceeded expectations. Retail sales increased 0.9% in January, helping the dollar rally to $US1.0206. The current account deficit tightened to $14.7 billion last quarter, with improved exports expected to add up to three-fifths of a percentage point to fourth-quarter gross domestic product report.
"The numbers show that growth was fairly solid in the final stages of last year," Barclays chief economist Kieran Davies told Fairfax. "Exports are picking up... you are seeing an improvement in [retail] sales. There was a big lift in consumer confidence over recent months so people are following through on that optimism by spending more."
Asian markets were mixed, with Shanghai opening positive but soon drifting into the red. The Shanghai Composite was lately down 0.1%, Hong Kong's Hang Seng up 0.41% and Japan's Nikkei 1.01% ahead. Dow futures were recently up 14 points or 0.1%.
Crude oil futures rallied 28 cents this morning to US$90.36 a barrel. Spot gold was $4.10 firmer at US$1,576.80 an ounce.
A "risk on" morning, with oil, gold, equities and the Aussie dollar all advancing. Still, the speccy end has been subdued lately following spectacular burn-outs in several market favourites. It takes a while for those sorts of wounds to heal and the market misses all the capital locked up in losing trades. Taking a longer view, the speculative end of the market has never really recovered from the GFC. The XSO is still some distance from last year's heights and not a heck of a lot over half what it was at the GFC peak. The last few years have not been times of plenty, but it's possible to grind out a good living. My morning was characteristic of that sort of low-excitement, low-risk trading. I've been waiting for AGO to hit 1.30 and took the trade just above. I've previously mentioned BLY as a nice intraday trader and it offered a couple of trades this morning. At the riskier end of the scale, EVR is finally producing the sort of volume that often heralds capitulation, but hopes for a bounce have proven forlorn as yet.
