The share market is higher for a second day after a weak inflation reading pushed the prospect of interest rate rises further into the future.
At lunchtime the ASX 200 was 28 points or 0.6% stronger at 4814, with all sectors except IT trading higher. Resource stocks fronted gains, with the gold sector, metals & mining and materials all up 0.9%.
A dip in the underlying inflation rate to its lowest level in 10 years sparked a surge in stocks following the release of the news at 11.30 am. The Reserve Bank's preferred inflation measure eased to 2.25% last quarter, down from 2.4% in the September quarter. The consumer price index rose 0.4%, nearly half what economists expected.
"Looking at the market reaction, you would have to say it's two surprises within the space of a day, with the producer price index and the CPI, so it looks as if the market has reacted quite positively to it," CMC Markets market analyst Ben Le Brun told Fairfax.
Virgin Blue and Newcrest Mining became the latest companies to cite the Queensland floods as they lowered profit expectations. Virgin Blue said it expected to take a $40 million hit from the floods and slower consumer spending. Newcrest lowered its full-year gold and copper production guidance, blaming wet weather in Australia and a shutdown at its West African operations.
Asian markets were stronger. Japan's Nikkei rallied 1%, Shanghai 0.03% and Hong Kong's Hang Seng 0.38%. Dow futures were recently at +2.
A brief recovery in gold faded to further losses this morning. Spot gold was recently down $3.10 at $1,331.90 an ounce. Crude oil futures eased another 33 cents this morning to $87.51 a barrel. The dollar was buying 99.51 U.S. cents.
Another welcome show of strength from our market. I've been too bearish in my expectations this week but the joy of day trading is that you can adapt to any situation as it develops. These are simply the best trading conditions in a very long time. KGL was this morning's gift bounce trade - in 13, out 15. Also caught smaller bounces in AXM and YTC. Holding TUC from the low. One possible mis-step was TRY - the support has held but there's no sign of a recovery yet.
