Thanks Suzie. Half-time round-up:Australian stocks surged this...

Thanks Suzie. Half-time round-up:

Australian stocks surged this morning following co-ordinated action by central banks overnight but pared gains as retail sales, building approvals and Chinese manufacturing disappointed.

At lunchtime the ASX 200 was ahead 96 points or 2.3% at 4215 with all sectors trading higher. The big miners and banks led the charge, sending the materials sector up 3.5% and financials 2.5%. The advances followed overnight news that six of the world's key central banks had united to reduce borrowing costs for banks facing higher rates as a result of the European sovereign debt crisis.

"The global monetary policy backdrop is turning more favourable," the chief market strategist at Ameriprise Financial in the US told Bloomberg. "This is all in the context of undervalued markets, so there are some good things happening but the key ingredient remains Europe and what happens there."

Asian markets joined the rally. Japan's Nikkei surged 2.09%, Shanghai 1.94% and Hong Kong's Hang Seng 4.91%. Dow futures were recently off 29 points or more than 0.2%.

Some of the steam came out of the Australian rally as a string of economic reports missed targets. Building approvals fell heavily for a second month and retail sales increased by half as much as economists predicted. Residential building approvals fell 10.7% last month for a year-to-date decline of 29.8%. Retail sales improved for a fourth month but the October increase of 0.2% was half as much as expected.

"I think confidence is shot," ICAP senior economist Adam Carr told Fairfax. "In October, we started to see a serial deterioration in Europe, and I think that's weighed on sentiment. The broad trend in retail trading is that we've seen a pick up, but this suggests that it's modest... it's the [building] approvals that are the real worry."

China's official manufacturing index confirmed a modest contraction, as expected following a 50 basis points overnight cut in bank reserve requirements. The manufacturing Purchasing Managers' Index fell to 49 from 50.4 last month, below the 50 level that separates expansion from contraction and weaker than the 49.7 consensus of economists surveyed by Dow Jones.

"The message is clear: the economy is slowing much faster than expected and the government has stepped into the ring. The loosening campaign has begun," the China analyst for IHS Global Insights told MarketWatch.

Crude oil futures rallied 26 cents this morning to US$100.56 a barrel. Spot gold was $2.30 stronger at US$1,748.30 an ounce. The dollar was buying US$1.0222.


No surprise to see our market fail to hold its highs, but this morning's data certainly didn't do us any favours. The pressure is mounting on the RBA to cut interest rates. These big gap-up days are never easy to trade but they're badly needed now and then to restore confidence and bring buyers back to the market. Just two trades here this morning - scalped ANP off the low and sold a few BLD bought late yesterday in hopes of a break north.