Stocks sag but still finish in the black

At the close, the S&P/ASX 200 Index was up 26.8 points, or 0.64 per cent, at 4213.7 19 points below its best for the day..

Ord Minnett private client adviser Jon Hancock said the resource sector had lost steam during the session, with shares in Rio Tinto giving up ground after it approved a $US1.33 billion of funding for its Simandou iron ore project in Guinea.

Rio Tinto finished down $1.17, or 1.8 per cent, at $65.08 after early sales at $66.40.

BHP Billiton closed flat at $36.40 after gaining 0.6 per cent earlier in the session, and Fortescue Metals Group lost 12?, or 2.6 per cent, to $4.52.

Lynas Corporation was another major mover, falling 12?, or 9.9 per cent, to $1.09 on turnover of 72.2 million shares on media reports that it has not been granted a licence to import rare earth ores into Malaysia.

"[There were] huge volumes going through there," Mr Hancock said. "Volumes are relatively

light but you've got spots of pretty strong volumes."

Europe's debt crisis continued to be a cloud hanging over the market, he said. "There is no way that a meeting next week is going to ensure the problem is going to go away."

Banks and financial stocks were higher, with the big four lenders led by National Australia Bank, which gained 37?, or 1.5 per cent, to $24.60.

Telstra rallied 5?, or

1.6 per cent, to $3.18 on turnover of 47.4 million shares after Tuesday's shareholder vote to approve the telco's deal with the federal government on the national broadband network.

US stocks rallied strongly overnight near the close on a report in Britain's The Guardian that France and Germany were ready to sharply boost the euro zone's rescue fund to help counter the sovereign debt crisis.

However, Dow Jones Newswires later reported that an official familiar with the negotiations had said reports of an agreement by Germany and France to raise the European Financial Stability Facility to ?2 trillion ($A2.7 billion) were "totally wrong".

Patersons Securities associate director John Curtin said the Australian market would be in a lull until the Reserve Bank's interest rate decision on November 1.

The spot price of gold in Sydney finished the Australian session down $US8.05 at $US1659.87 an ounce.