Futures prices rose strongly from the opening bell on Thursday as talk swept the market of the impending government announcement. Prices settledback later in the day.

"There was a big rise in volume today, a lot of short covering," said Graham Smith of Ord Minnett Jardine Fleming Futures. Sydney Futures Exchange wool futures prices were up by 10-15 cents in earlier trading on Thursday but settled back for gains ranging up to 11 cents at the close.

Nearby December 1998 closed six cents higher at 522 cents a kilogram while distant February 2000 sold up by 11 cents to 600 cents.

"The big news came this morning before the market opened. That news got around the industry pretty quickly," Smith said.

"We've gotsome pretty good volume today across the strip." About 100 contracts changed hands when the market opened.

"A lot of short covering today and plenty of speculative buying," he said.

The market welcomed the government's freeze decision in price terms, even though grower organisations have said they oppose the decision, he said.

Grower bodies were more likely to oppose the freeze than growers themselves, he said.

Australia's Primary Industries Minister John Anderson said it was hoped the decision to freeze sales from the official 1.05 million bale stockpile and to privatise statutory authority Wool International (WI) would be positive for prices.

Until the freeze, WI was required by legislation to sell between 90,000 and 350,000 bales a quarter from Australia's official wool stockpile. Recent sales have been at around the lower limit.

With wool sales severely hit by the Asian economic crisis and fashion changes away from wool, Australian farmers also have been building a second unofficial stockpilein stores and on farm. Anderson on Thursday put the size of the unofficial stockpile at between 850,000 and 1.1 million bales.

Wool prices have been trapped in a prolonged slump which have pushed auction prices down toward the all-time low of 429.30 cents a kg in Australian Wool Exchange eastern market indicator terms.

The government's stockpile freeze announcement halted the big decline in physical wool auction prices on Thursday, brokers said.