Economy round-up: cautious US confidence lifts stocks

A cautious sense that the US may slowly be getting back on its feet has helped push Australian markets higher in trading today.

At 12.45pm the S&P/ASX 200 is up 1.3% on yesterday’s close to 6544.4, led by increases in commodities stocks on stronger copper and oil prices and in the banks, buoyed by the sense that the sub-prime fallout may be coming to an end.

The main cause of the generally positive sentiment is a comment by a senior US Federal Reserve official that he doesn’t believe the US economy is so weak as to warrant another interest rate cut.

Fed Governor Randall Kroszner said that while the US had been through a “rough patch,” recent weaker economic figures “would not, by themselves, suggest that the current stance on monetary policy is inappropriate”.

In Australia, the volume of merchandise imports jumped by a sharp 11.9% in original terms in October, a hefty turnaround for the 7.9% fall in September.

A 15% increase in fuels imports and substantial increases in manufactured articles and machinery and transport equipment were key reasons for the rise. The strong Australian dollar in October meant a boost in import volumes was to be expected, according to ANZ economist Alex Joiner.

Today the Australian dollar is well down on the heady heights it achieved in October: at 1pm it was trading at US89.80c.