Morning traders.Market wrap: Local stocks are set to gap higher...

Morning traders.

Market wrap: Local stocks are set to gap higher this morning after merger news fuelled the biggest three-day rally in US stocks this year.

The June SPI futures contract ended the night session 30 points or 0.64% stronger at 4694, a 52-point premium to yesterday's close on the XJO. Oil and gold advanced but most industrial metals weakened.

Energy stocks led the S&P 500 to an overnight gain of 1.5% as oil fluctuated between US$102 and 103 following weekend air and seas strikes on Libyan targets. The S&P 500 is now more than 3% above the three-month low it set on March 16. The Dow rallied 178 points or 1.5% and the Nasdaq 1.83%.

Risk appetite continued to recover following signs of progress at Japan's crippled nuclear plant and fresh take-over deals involving telecom giant AT&T and broker Charles Schwab. US nuclear officials said the situation at Fukushima was "on the verge of stabilising" as Japanese officials got closet to restoring power to all of the damaged reactors. The news helped uranium stocks in the US recoup some of last week's losses.

"Investors are gaining confidence that despite all the event risk that markets have been exposed to in the last eight weeks or so, recovery in global growth will remain fairly solid," a manager at Platypus Asset Management in Australia told Bloomberg. "As an investor, you can deal with the downside from natural disasters and wars a lot better if there is some comfort that the economic fundamentals will remain protected."

The market shrugged off a poor US housing report. Sales of previously-owned homes dropped 9.6% last month and the median purchase price fell 5.2% to its lowest level since 2002.

Oil held onto most of yesterday's gains as Libyan leader Moammar Gadhafi promised a "long war" as western forces continued to hit targets in the capital, Tripoli, overnight. Crude futures were recently ahead $1.22 or 1.2% at US$102.29 a barrel after earlier running as high as $103.35.

"If we use 2008 as our gauge, oil can go a fair amount higher without denting the equity market or the consumer," the managing director at Dearborn Partners told MarketWatch, suggesting a target of US$4 a gallon or above US$110-115 a barrel of crude.

Gold and silver continued to benefit from geopolitical uncertainty. Gold for April delivery was recently up $10.50 or 0.7% at $1,427 an ounce. May silver was up US$1.04 or 3% at $36.10 an ounce.

Copper was hurt by the disappointing US housing news and weak Chinese imports. Official customs data showed China imported 28% less refined copper last month than in January.

"China has been very vocal about slowing down their economy; our economy is still anemic, and the demand outlook is still pretty weak," the president of Covenant Trading in the US told Dow Jones Newswires. "Most traders are expecting the market to come down... because most people still have a negative bias on copper."

In London, copper eased 0.9%, lead 1.4%, nickel 0.1% and zinc 1.8%. Aluminium rallied 0.55% and tin 1.7%. US copper was recently down 0.9%.

The major European markets continued to recover from last week's 2.8% drop, the region's worst weekly performance in eight months. Britain's FTSE rallied 1.19%, Germany's DAX 2.28% and France's CAC 2.47%.

TRADING THEMES TODAY

REBOUND: Forget about the Middle East and nuclear meltdowns, US investors are back with a vengeance. It hasn't taken long for US markets to discount the threat from rising oil and the unresolved crisis at Fukushima. Seems nuts to me, but you gotta trade what's in front of you and the biggest rallies always come when the outlook appears darkest. Oil and gold held yesterday's Australian-daytime gains but didn't really build on them. Dr copper remains a concern - the "metal with the degree in economics" doesn't share the market's exuberance just yet, but that didn't prevent solid gains in BHP and Rio in overseas trade.

ECONOMIC NEWS: A quiet 24 hours ahead, with nothing significant scheduled here today and little of interest in the US. Tonight's releases include the monthly house price index and a regional manufacturing index. Treasury Secretary Tim Geithner is due to address a conference for small companies.

Good luck to all.