Morning traders.Market wrap: A renewed promise of cheap money...

Morning traders.

Market wrap:

A renewed promise of cheap money from the US Federal Reserve catapulted US stocks towards a five-year high overnight and has the Australian market pointed north this morning.

The June SPI 200 futures contract ended the night session 45 points or 1% stronger at 4317 which suggests shares will open at their loftiest level in at least a week.

The S&P 500 surged 1.39% to its best close since May 2008 after Fed chairman Ben Bernanke said the slow economic recovery in the US required "continued accommodative policies". The Dow put on 161 points or 1.23% to reverse last week's losses and the Nasdaq continued to lead the major benchmarks, rising 1.78%.

Bernanke said in a speech that there was no guarantee that the recent improvement in employment in the US would be self-sustaining - an observation that traders interpreted as a signal that the Fed will hold the overnight borrowing rate near zero and maintain a bond-buying program that pumps money into the economy. Traders were also relieved that the Fed chairman did not rule out a so-called "QE3" or third round of monetary stimulus.

European markets enjoyed a strong night after German Chancellor Angela Merkel said for the first time that the temporary and permanent euro-zone rescue funds could run in parallel, effectively increasing Europe's fire-power to tackle sovereign debt problems. Also helping sentiment was an unexpectedly strong reading from a a closely-watched German business-climate index, which soothed concerns after last week's disappointing manufacturing report. Britain's FTSE rallied 0.82%, Germany's DAX 1.2% and France's CAC 0.74%.

"Bernanke made it clear that while the Fed is not going to be revving the engine anytime soon, they are going to keep their foot on the gas," the chief market strategist at Russell Investments told Bloomberg. "At the same time, the Europeans appear to be more serious about addressing risks."

Commodities benefitted from a sharp downturn in the US dollar following Bernanke's speech. The US dollar index, which measures the greenback against a basket of currencies, was lately off 0.53% and near its lowest level since the start of the month.

Copper had its biggest rally in two weeks as metals benefitted from a "risk on" night. In London, copper jumped 2.2%, aluminium 0.9%, lead 0.55%, nickel 0.5%, tin 1.9% and zinc 1.1%. US copper was recently up 2.2%.

Traders piled back into precious metals as the threat of looming rate rises in the US dissipated. Gold for April delivery moved to its best level in two weeks, lately up $30.50 or 1.8% at US$1,692.90 an ounce. May silver put on 59 cents or 1.8% at US$32.87 an ounce.

Oil reversed early losses to follow equities and other risk assets higher. Crude for May delivery advanced 23 cents or 0.2% to US$107.10 a barrel.

TRADING THEMES TODAY

RISK ON: It's time for the XJO to make another charge at the 4300/4350 resistance zone after Helicopter Ben, the trader's friend, gave Wall Street another leg-up overnight. If only Australian monetary policy was as accommodative. Our market has been stuck in a sideways range since August last year while international investors harvest gains through currency movements. No sector was left behind in the US last night, but small caps were notably strong, pushing the Russell 2000 up 1.8%. The party in Australian small caps is far from over.

ECONOMIC NEWS: Reserve Bank Assistant Governor Guy Debelle is due to address the Morgan Stanley Global Macro Investment Conference at 9.15am EST. Consumer confidence is likely to be tonight's highlight in the US, but Fed chairman Bernanke is due to deliver another speech. Also scheduled: the house price index and Richmond Manufacturing Index.

Good luck to all.