Australian shares advanced for a second day, but underperformed expectations as a credit downgrade for France took some of the shine off strong overseas gains.
At lunchtime the ASX 200 was 20 points or 0.5% stronger at 4381 after hitting an early intraday high of 4386. Resource stocks led the advance, with metals & mining up 1.5%, energy stocks 1.1% and gold stocks 0.9%. Utilities -0.4% was the only sector to retreat.
The prospects for the session dimmed after ratings agency Moody's cut France's credit rating to Aa1 with a negative outlook, turning the spotlight back on concerns that Europe's credit crisis is moving from the periphery to the heart of the European Union.
"Moody's news is certainly not positive but market reaction seems contained," the head of FX trading Japan for UBS told Reuters. "Given the recent market rally [in Japan], the rest of the week is likely to be spent on adjusting positions before the [US Thanksgiving] long weekend, with any uptick giving way to profit taking."
Asian markets rallied, but the gains were more modest than the 2-2.5% seen overnight in Europe and the US. Shanghai put on 0.06%, Hong Kong's Hang Seng 0.85% and Japan's Nikkei 0.21%. Dow futures were recently down nine points or less than 0.1%.
The minutes from the last Reserve Bank meeting held out the prospect of further rate cuts in the months ahead. "Members considered that further easing may be appropriate in the period ahead," the minutes, released this morning, said. "However, with prices data for the September quarter slightly higher than expected and recent information on the world economy slightly more positive, the board judged that the stance of monetary policy was appropriate for the time being."
Crude oil futures gave back 24 cents this morning at US$88.95 a barrel. Spot gold was $1.90 firmer at US$1,733.30 an ounce. The dollar was buying $US1.0404.
A morning that promised much but delivered, well, not that much for many, I suspect. At least SIR can be relied upon to generate some volatility. I missed it at its bounce-low and switched to the nearology plays, which have showed a lot less vim. Scalped BUX once and went back for more. Less successful in MAT, which has bounced like a bag of custard. Got fluky in taking DYL on a good-news day.
