**29/09/10 - 7.45am - by James Gerrish**
Its a unique situation in the US at the moment with traders actually buying equities on the back of underwhelming economic data. The idea is that if data continues to be weak, it increases the chance of policy makers to step in and launch another round of stimulatory measures by purchasing debt to underpin the recovery.
It appears that the Federal Reserve will take whatever means are necessary to support the fragile recovery that is playing out. This could ultimately have an inflationary impact in the US and this would be a positive for equities and commodities (and negative for Bonds). I think we're a long way from any concerns about inflation but its likely to be a topic that will get a lot of air time in the coming years.
On the market last night, the DOW JONES added +46 points or +0.43% to close at 10858. In the UK, the FTSE 100 closed +5 points or +0.09% higher to 5578. Locally, the SPI Futures contract is matching +20 points higher indicating a higher start to trade this morning. In the US, the DOW was down 84 points at its worst but a recovery came in late trade to see the index higher. This a positive sign and gives a strong indication of higher levels in the near term.
The commodity markets have continued to be strong with Copper up for the fourth session out of five. Copper. continues to be bullish, trading just shy of its April high. (Copper stocks on the local market include Oz Minerals, PanAust, Equinox).
We spoke about the high degree of correlation between the Copper price and the Aussie Dollar earlier in the week and true to form we saw the Dollar trade close to US97c overnight.
The broader commodity space as shown through the Commodity Index still looks firm.after breaking out from a consolidation pattern.
Looking at the local market from a technical sense, I'd suggest that we'll see another few days of strength leading into the end of the week and maybe early next then I'd be cautious about some possible weakness coming in. This is based on the price action that is playing out and the time taken for the more recent consolidation pattern to firm. Overall I remain bullish on the market and particularly so in the commodity space.
