Markets went whoopee after US Federal Reserve chairman Ben Bernanke indicated he though the "technical recession" in the US was probably over.
A 2.7% rise in August retail sales in the US helped, as did a good manufacturing report for the New York area.
The rise in retail sales was boosted by the cash for clunkers car scappage scheme, but even after that impact and higher petrol, they were still up 1.1%, which was more than expected.
Overnight US industrial production for August rose 0.8% after a 1% rise in July. The cash for clunkers scheme was the reason.
But other industrial production sectors were weak and the markets chose not to look at those.
However consumer and producer inflation figures were low.
US markets rallied to their highest close since early October on Tuesday and Asian shares hit their highest levels for 2009 after upbeat U.S. economic news gave riskier assets leveraged to global growth a boost, while the U.S. dollar slipped to a one-year low.
Most major Asian markets posted gains of 1% or more. European markets rose more than 1% overnight. Oil prices rose. Copper rose 4% and gold hit a new recent high of $US1,020 an ounce.
The Australia was up more than 2% yesterday and is looking for another big gain today.
At the close, the ASX200 index was up 110.1 points, or 2.4%, at 4650.4 points, the highest close since October 3 last year and easily breaking the 4600-level.
The All-Ords jumped 105.6 points, or 2.3%, to 4652.8.
Tokyo’s Nikkei 1.1% as the new DPJ Government was formed and took control of Parliament.
Many regional currencies likewise did well, especially those of big commodity exporters such as Australia, largely at the expense of the greenback.
The Aussie finished at 86.21 US cents in Sydney, but rose to a new 12 month high of 87.40 in offshore trading last night, up more than a cent for the night..
The rise in US retail sales added to expectations that third quarter growth in America would be positive with a big rebound, thanks in part to businesses rebuilding inventories to meet demand.
That’s why there was a reaction to the Fed chairman’s comments.
Media reports leapt on the comments.
"The recession is very likely over at this point," Bernanke said, in response to questions," on New York.
"Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time," Bernanke said at the Brookings Institution, a Washington think tank." was how Reuters quoted him on its newswires.
But both were excerpts from a much longer answer as Reuters carried on its main news website in its entirety.
It is in fact not all that different from a speech he made last month.
And his comments on the recovery were not new, just a reminder of what will be the big theme in 2010 and 2011: a profitless rebound thanks to persistently high unemployment.
The high level of unemployment means a large gap between the potential growth rate of the US economy and the actual level of output and demand and that will mean a lid on inflation, even if some bears try to force up rates.
US interest rates have not moved all that much from around 3.45% (give or take 0.10% either side) for the key 10 year bond for the past two months.
Bernanke said there was a risk that labor markets will remain weak through 2010 because growth will be too anemic to create jobs. Many economists now expect the labor market to recover slowly, he noted.
Unless the economy can manage growth stronger than its long-term trend rate, "unemployment will be slow — slow to come down," he said. "It will come down, but it may take some time."
Bernanke said most forecasters think economic growth in 2010 will be moderate because of "ongoing headwinds," including financial and credit problems, sectoral adjustments in the economy, the desire of families to pay off debt and the need for the federal government to restrain spending.
Gee, that sounds like the basis for a decent market rally doesn’t it.
Has anyone really asked how US companies will generate sales and earnings growth in 2010 against that background?
