Australian shares are on track for back-to-back gains for just the second time this year after the Reserve Bank upgraded its growth outlook while warning of increasing inflationary pressures.
At lunchtime the ASX 200 was trading 28 points or 0.5% ahead at 5159 as gains in cyclical sectors outweighed declines in defensives for a second day. Energy stocks put on 2%, metals & mining 1.3%, the Small Ordinaries 1.1% and financials 0.6%. Property trusts dropped 0.8%, health 0.3% and telecoms 0.2%.
The Reserve Bank this morning increased its GDP growth expectations for the year to 2.25-3.25% from a previous forecast of 2-3% made in its last quarterly Statement on Monetary Policy. However, the bank also warned that inflation could run as high as 3.25% by the middle of year, above the bank's 2-3% target band. Read more here.
"Growth is thought likely to strengthen a little in 2014, though to a pace that is still a little below trend," the statement said. "It is then expected to pick up further to an above-trend pace by 2015/16."
The morning's other economic news was less favourable, suggesting building activity contracted last month, dashing hopes of a rebound after December's positive reading. The AIG Performance of Construction index declined 2.6 points to 48.2 from a December figure of 50.8.
China's Shanghai Composite fell 0.5% this morning as it resumed trade after the week-long Lunar New Year break. Hong Kong's Hang Seng rallied 1.03% and Japan's Nikkei 1.6%. Dow futures were recently up nine points or less than 0.1%.
Spot gold rallied $2.10 this morning to US$1,259.30 an ounce. Crude oil futures slipped two cents to US$97.80 a barrel. The dollar was buying 89.41 US cents.
Many thanks all for the positive feedback this morning. Helps keep my shoulder to the grindstone, lol. The index is still threatening to make a mug of my observations. The final reckoning will likely depend on how Shanghai fares after its long holiday. As for trading, we have been as Endless suggests in the doldrums lately, although this morning brought a few glimmers of hope - the AUT takeover offer and breakouts in FGE, BBG, VHL and likely a few more. I spent too much of the morning admiring gift horses. Scored a couple of pips in CTO. Also took CLH on pullback for no reward as yet.
