Investors sceptical despite Spain rescue plan

Stocks were expected to get a boost from the dramatic decision particularly after the public holiday forced traders to miss out on Monday's regional rally but weak leads from the US (down 1.3 per cent) and London (flat) dampened expectations, and the Australian market barely stumbled into positive territory. The benchmark S&P/ASX 200 Index closed up 9.2 points at 4072.9.

Analysts said the fact that Spain's capital shortfall would be resolved with a rescue plan had meant relief for investors, but they remained sceptical about the plan because any extra funding for the Spanish government would increase its already high debt-to-GDP ratio, which is now 68.5 per cent though that is still well below Greece (165 per cent), Italy (120 per cent), Ireland (108 per cent) and Portugal (107 per cent).

Altius Asset Management's chief investment officer, Bill Bovingdon, said the effort to save Spain's banks had boosted risk appetite, but it was only temporary.

"There's a degree of scepticism building in financial markets because they want to see something a bit more enduring rather than just another just-in-time measure that prolongs the agony," he said. "There's concern about the conditions surrounding the bailout package, and obviously we still have a fair-sized hurdle coming up this weekend with the Greek elections."

Meanwhile, National Australia Bank's business survey found conditions and confidence took a turn for the worse last month. It showed a fall in both indices to nine-month lows, with conditions deteriorating to minus 3.5, from minus 0.1, and confidence dropping to minus 2.2 from 4.1.

But analysts disagreed on the significance of the figures. TD Securities' Asia-Pacific macro strategist, Alvin Pontoh, said the fall in both indices had probably been exaggerated by negative global headlines.

But UBS economists Scott Haslem and George Tharenou said the data should cause a rethink of last week's stronger than expected GDP figures.

"Today's NAB business survey really does question the 'reality' of the Q1 data," they wrote in a note to clients. "While Reserve Bank governor [Glenn] Stevens' comments last week suggested the underlying economy . . . is around trend . . . the slump in business conditions in recent months suggests that growth slowed further in Q2, to a well-below-trend pace."

Concerns about the situation in Europe weighed on resource stocks, with BHP Billiton losing 19? to $31.72 and Rio Tinto dropping 94? to $54.65.

But banks and financial stocks ignored the concerns. Commonwealth led the charge, rising 35? to $50.82 ANZ gained 21? to $21.77. AMP was up 10? at $3.91.