Morning traders.Market wrap: Solid gains for overseas equity and...

Morning traders.

Market wrap: Solid gains for overseas equity and resources markets after a mixed night of economic signals point to another bright open for local stocks.

US stocks broke north in afternoon trade to finish at 11-month highs after Federal Reserve Chairman Ben Bernanke declared the recession is probably over. The Dow advanced 0.59%, the S&P 500 0.31% and the Nasdaq 0.52% as investors balanced better-than-expected retail sales and manufacturing figures against growing signs of inflation and the threat of interest rate rises. Earlier, major European stock markets crept higher. The FTSE gained 0.46%, the CAC tose 0.58% and the DAX finished at +0.16%.

Retail sales in the US jumped 2.7% last month, with car dealers receiving a healthy boost from the government's "clunkers" rebate program and other merchants faring well. Other data suggested improvement in the manufacturing sector. A "business conditions" index hit its highest level since late 2007.

American financial stocks advanced strongly, with the S&P Bank Index adding 3.03%. Airlines gained another 3.81%, REITs closed 1.62% higher and there were gains for oilers (+0.6%) and precious metals miners (+2.43%) as commodities rallied.

Crude oil futures jumped 3% to trade back above $70 a barrel after Bernanke's declaration that the recession was likely over. Oil was recently trading at $70.88, up more than $2. Gold futures also surged. The spot price recently traded at $1007.80, up $8 on this time yesterday.

Copper led a rally in base metals, rising for the first time in five sessions as US retail sales fanned hopes of an economic rebound. In London, copper rose 1.1% and there were bounces for other beaten-down metals including nickel, zinc, tin, lead and aluminum.

Futures traders expect our market to start the day in the green. With 20 minutes left to trade, the SPI futures index was 20 points higher at 4567.

TRADING THEMES TODAY:

THE X FACTOR: One possible explanation for the weakness on our market this week is international funds pulling cash out of Australian equities due to a major index rebalance. The FTSE Developed Asia Pacific Index recently announced changes that reduce the Australian weighting in the index from 53% to 45%. International fund managers who track that index therefore need to sell Australian equities to bring their portfolios into line with the new weightings. One analyst estimated that could mean up to $4b of selling this week. Might explain why our market has faded each day this week. Let's see if the same pattern plays out today.

ECONOMIC NEWS: There's nothing major scheduled locally today but a big week in the US continues tonight with the consumer price index, industrial production data, home builders index and second quarter current account reading.

Good luck to all.