A double dose of economic disappointment failed to prevent the share market rallying for a second day as resource stocks continued to heal from multi-year lows.
At lunchtime the ASX 200 was 32 points or 0.6% higher at 5313 after evidence of weakness in the economy pushed the dollar briefly below 84 US cents amid speculation about further interest rate cuts. The dollar was lately trading at 84.13 US cents following news that the economy grew at less than half the pace anticipated by economists last quarter. Growth eased to 0.3% during Q3 from 0.5% in Q2, dragging the annual rate of growth down to 2.7% from 3.1%. Economists had anticipated an improvement in quarterly growth to around 0.7%. More significantly, real gross domestic income shrank for a second straight quarter to reflect the deteriorating terms of trade. Read more here.
A separate report showed services activity wallowed near a 14-month low in October. The AiG Performance of Services Index edged up to 43.8 points from 43.6 in September, well below that 50-point level that separates contraction from expansion. Read more here.
Resource stocks shrugged off further overnight weakness in oil, copper and gold. Energy stocks rallied 0.6%, gold 0.9% and metals & mining 0.4%. The defensive consumer staples sector (+1.5%), utilities (1.2%) and health (+1.2%) saw the best of the gains.
Asian markets continued to improve. China's Shanghai Composite advanced 1.73%, Hong Kong's Hang Seng 0.88% and Japan's Nikkei 0.94%. Dow futures were recently up seven points or less than 0.1%.
Crude oil futures were this morning at US$67.74 a barrel. Spot gold was $1.60 firmer at US$1,201 an ounce.
A fine morning for existing holders, but not a lot in the way of intraday buying opportunities, so far as I could see. Volatility has collapsed in the last day and a half. Consoled myself with the knowledge I was holding one of the day's best performers in LNR, although not cheaply enough to get much more than relief out of the bounce. Still, you can't underestimate the value of getting out of a bad trade with your shirt. It's the losses that determine whether or not you survive in this game. Placing something in the metaphorical 'bottom drawer' is the first step on the grim road from active trader to disappointed investor.
