A robust rebound in the economy helped stocks sustain gains this morning as Asian equity markets and US futures rallied.
At lunchtime the ASX 200 was 83 points or 2% stronger at 4158, more than erasing yesterday's losses. The big banks led the rally, driving the financial sector up 2.8%, ahead of metals & mining +2.5% and consumer discretionary stocks +1.9%.
"I think our market was probably overdone yesterday and for the last couple of days, particularly," RBS Morgans spokesman Tony Russell told Fairfax. "We've had a raft of terrible news and major concerns [which has] seen a huge amount of money fly into the bond markets. I think the values there are well and truly at their limits so markets are probably expecting to see a bit of money flow back into more risky securities such as equity markets."
The market rallied from the open after Reserve Bank Governor Glenn Stevens flagged a steady outlook for interest rates in a speech before trading began this morning. Mr Stevens said Chinese and Indian demand for resources would continue to support the Australian economy despite a recent deterioration in the prospects for global growth.
That view was reinforced by the release of June-quarter GDP figures at 11.30 am AEST, which showed the economy rebounding strongly from the Queensland floods. The economy grew by 1.2% last quarter, stronger than the 1% rise tipped by economists after the March quarter's 0.9% contraction. Household consumption was much stronger than consumer confidence readings have implied, increasing 1% over the quarter.
Asian markets rallied for the first session in four. Japan's Nikkei added 1.44%, Shanghai 0.42% and Hong Kong's Hang Seng 0.74%. Dow futures were recently up 45 points or 0.4%.
Crude oil futures eased 5 cents this morning to US$86.37 a barrel. Spot gold was $2.30 weaker at US$1,874 an ounce. The dollar was buying US$1.0578.
And so the great game continues. Nice gap higher this morning to steady the ship ahead of some big events this week - German court decision tonight and speeches from Obama and Bernanke tomorrow night. I sold the last of my AUN into this morning's breakout and just picked up a few VRX near the morning low for any intraday recovery.
