Reuters New Zealand

Australia stocks up 1.1 percent; Virgin Blue flies

Tuesday March 24, 04:16 PM

(Adds Virgin Blue)

WELLINGTON, March 24 (Reuters) - Australian shares pared gains to be 1.1 percent higher on Tuesday, as initial enthusiasm over a U.S. plan to absorb $1 trillion of banks' toxic assets faded.

An analyst said the initial rush was driven by Wall St rallying more than 6 percent, but was tempered as investors realised the benefits for most Australian stocks, with the exception of banks, would be indirect.

For more on the U.S. banks plans, see [ID:nSP429491].

The benchmark S&P/ASX 200 index .AXJO was up 39.4 points at 3,589.7 by 0310 GMT, after earlier gaining as much as 2.6 percent to its best intra-day level since mid January.

The index rose 2.3 percent on Monday to its highest close in five weeks.

New Zealand's NZX-50 index .NZ50 also eased after a strong start and was last 1.8 percent higher at 2,638.7.

STOCKS ON THE MOVE

* Airline Virgin Blue (ASX: VBA.ax) gained 18 percent, or 4 cents, to 26 cent, extending Monday's 10 percent gain, after signing a deal with United States carrier Delta Air Lines DAL.N.

0305 GMT

* Gold miners Lihir Gold LGL.AX and Newcrest Mining (ASX: NCM.ax) fell just over 1 percent as gold prices fell on the rally in stocks. (See [GOL/] for more on the gold market.)

0115 GMT

* Australian resources firm Straits Resources Ltd (ASX: SRL.ax) rose 16 percent after Thailand's PTT International PTT.BK said on Monday it would buy some of Straits' coal and salt assets in a $335 million deal.

0105 GMT

* Debt-laden miner Oz Minerals Ltd OZL.AX fell more than 14 percent after the government extended its review into a $1.8 billion rescue bid by Chinese state-owned Minmetals. [nSYU006235]

2315 GMT ($1=1.42 Australian Dollar) (Reporting by Adrian Bathgate)

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