The share market hit a 19-month high this morning as US futures shrugged off signs of opposition in Washington to the latest budget deal.
At lunchtime the ASX 200 was 43 points or 0.9% ahead at 4692. Cyclical sectors led the rally, with metals & mining rising 1.7%, the Small Ordinaries 1.7% and industrials 1.6%. The only sector to retreat was defensive: health -0.1%.
The gains came despite questions over a fiscal cliff deal in the US that passed the Senate but faces opposition in the Republican-controlled House of Representatives. Recent reports said the House was preparing to vote on the existing package some time after 1pm AEST today. Read more here.
"It's extremely disappointing not just for the US economy and investors but for global markets, that the US political system itself just can't seem to get it done," Stephen Halmarick, head of investment markets research at Colonial First State Global Asset Management told Bloomberg. "The process we're going through at the moment does anything but build confidence."
US futures continued to signal optimism that a deal will happen. Dow futures were recently up 269 points or 2.1%.
Hong Kong's Hang Seng rallied 1.55% this morning. Stock exchanges in China and Japan are closed until Friday.
The morning's domestic economic reports continued the recent run of data. Manufacturing activity contracted for a 10th month, with the AIG performance of manufacturing index unchanged at 44.3 in December. A separate report showed private sector credit slumped to its weakest level in 19 months in November.
Crude oil futures rallied 18 cents this morning to US$91.97 a barrel. Spot gold was $2 firmer at US$1,677.60 an ounce. The dollar was buying $US1.0438.
Nice start to the year, with risk assets continuing to point towards some sort of fiscal cliff deal. The question after the euphoria wears off is just how enthusiastic world markets should be about tax increases in the world's largest economy. But that's a problem for another day. Good profit this morning from RXL. Pity I missed DRK. Still hoping for a little more weakness in QFX to offer an entry. I was watching for any weakness in defensives this morning for scalping opportunities and got a few points out of PRY. Less successful in KOR - probably a day too early.
