Australian shares have rallied for a second day as US futures and Asian markets welcomed a deal on a bail-out for Cyprus.
At lunchtime the ASX 200 was 30 points or 0.6% ahead at 4998 after running as high as 5023 before European finance ministers signed off on an EU/ECB/IMF plan to assist Cyprus. Financial stocks led the gains, rising 1%, followed by consumer discretionary +0.9% and industrials +0.7%.
The rescue deal agreed this morning appears to spare small savers but slug depositors with more than 100,000 euros in their account with a levy of 40%. The levy was a condition of Cyprus securing $13 billion of aid from its lenders.
"The news was what markets were waiting for, some kind of an agreement," the director of foreign exchange at Credit Agricole in Tokyo told Reuters. "But uncertainties remain."
US futures flagged relief that a deal was emerging. Dow futures were recently up 44 points or 0.3%. Shanghai advanced 0.37% this morning, Hong Kong's Hang Seng 0.93% and Japan's Nikkei 1.41%.
Crude oil futures rallied 29 cents this morning to US$94.09 a barrel. Spot gold was $1 weaker at US$1,608.20 an ounce. The dollar was buying $US1.0451.
The market reaction to the Cyprus deal is broadly positive but there are hints of ambivalence over the terms, which on the face of it increase the risk of bank runs. Oil and US futures are bullish but other assets are less certain. Gold, a traditional haven, initially dropped around US$6 but has since regained most of that loss. The XJO is about 20 points off its high and the Small Ords is down 0.2%. I'm not predicting Armageddon, but it's questionable whether this deal is as market-friendly as expected. Time will tell. Been a frustrating morning here, cursed with part-fills and the Adobe/Iress problem discussed by other traders. Caught MGX at the low but there's minimal benefit in nailing the entry if all you get is 7,370 shares. Also caught a part-fill in CUL and missed several more by a pip or two.
