Morning traders.Market wrap: Shares face another flat start...

Morning traders.

Market wrap: Shares face another flat start after a rally on Wall Street inspired by yesterday's Chinese GDP and hints of further stimulus in the US fizzled in the final hours.

The September SPI futures contract ended the night session 2 points stronger at 4490 as traders concluded yesterday's gains on the XJO pre-empted most of the overnight action.

US stocks ended three days of losses after Federal Reserve chairman Ben Bernanke said the Fed was ready to stoke the economy if it continued to flag. But the initial euphoria dimmed over the course of the session and the major indexes closed with a fraction of their initial gains. The Dow surged more than 160 points in early trade but finished just 45 points or 0.36% ahead. The S&P 500 finished 0.31% ahead and the Nasdaq added 0.4%.

Bernanke released prepared remarks to Congress that said the Fed believed the recent slowdown in the US was temporary but it was ready to take "untested steps" to stimulate the economy if conditions worsened. He said additional measures might include bond purchases.

However, the ongoing squabble over the US debt ceiling continued to cast a long shadow. Bloomberg reported that last night's share rally began to fade after House Speaker John Boehner declared there was no guarantee the debt limit will be increased if politicians can't agree terms before August 2.

Risk appetite improved in the US, with energy and material stocks outperforming defensive sectors as the market welcomed solid economic numbers out of China and Japan yesterday.

"China is looking more and more like they've orchestrated a soft landing at a high rate of speed, and Japan is showing increasing signs of really snapping back," the chief investment strategist at Wells Capital Management in the US told Bloomberg. "It's been even further boosted here by comforting comments from the Fed. Lost in the background with all the other news is we still have a pretty good earnings season out there. That's good news, too."

The US dollar turned sharply lower at the prospect of QE3. The dollar index was recently off 1.26%. The Australian dollar surged nearly two cents to US $1.0788.

Gold continued its record run as the weaker dollar offered another reason for traders to hedge. Gold for August delivery charged $24.10 or 1.5% to US $1,586.40 an ounce.

"Inflation and deflation have now been slugging it out for over a decade, and physical gold remains an obvious, sensible refuge for private savings caught in the middle," the head of research at BullionVault.com told MarketWatch. "A European debt-default, plus QE3 in the States, would make the perfect storm yet again."

Oil was boosted by the weaker dollar and a larger-than-expected decline in weekly US inventories. Light sweet crude for August delivery was recently up 51 cents or 0.5% at US $97.93 a barrel.

A rally in industrial metals largely faded with US equities as traders equated the need for QE3 with weaker economic growth. In London, copper eased 0.2%, lead 0.65% and tin 0.1%. Zinc added 1.2%, aluminium 0.9% and nickel 1.7%. US copper was recently up 0.1%.

The major European markets were boosted by the initial rally in the US and closed before the decline set in. Britain's FTSE put on 0.64%, Germany's DAX 1.31% and France's CAC 0.51%.

TRADING THEMES TODAY

TREADING WATER?: There were plenty of reasons for Wall Street to rebound last night - three days of losses, solid Asian data, hints of QE3, gains in Asia and Europe, a weaker dollar - and yet the major indexes couldn't hold their gains. In other words, traders sold the rally. There was likely some caution ahead of a heavy raft of economic data in the US tonight (see below) and earnings reports from bellwether stocks Google and JPMorgan Chase. If tonight's news is mostly good, we should have the makings of a genuine rally, but it's hard to see our market moving too far today unless there is unexpected news. Unfortunately, as I ready this for posting, news is breaking that ratings agency Moody's is threatening to downgrade the US's bond rating. That could be a game-changer. Read more here.

GOLD: The more bad news piles up, the higher gold runs. It's in record territory already but there is no shortage of reasons why it won't go higher. The strong local dollar reduces the effect of higher US prices but sentiment is very positive towards our goldies right now.

ECONOMIC NEWS: Inflation expectations are due at 11 am AEST. A packed session for US data tonight includes retail sales, core retail sales, the producer price index, core PPI, weekly unemployment claims, further testimony from Ben Barnanke, business inventories and natural gas storage.

Good luck to all.