By Greg Peel

The Dow rose 202 points or 1.6% while the S&P gained 1.6% to 1326 and the Nasdaq added 2.2%.

Wall Street was off to a flier last night on before-the-bell developments which included US earnings results and signs of positive moves in Europe.

European officials are due to meet on Thursday night to discuss the best option for dealing with Greek debt and how the situation can be contained to ease the contagion fears that have spread all the way to Italy. Up to now, everyone had come around to the idea of a partial default on Greek debt ? one which would imply the burden being shared by bondholders as well as eurozone taxpayers ? but the stumbling block had been the ECB. The central bank's largely anachronistic president Jean-Claude Trichet has maintained, as recently as last weekend, that if the ratings agencies call a partial default a default then the ECB can't hold Greek debt as collateral.

But blow me down if last night someone didn't see the sense in perhaps tweaking those rules. It must be a tough decision ? should we head off the complete and total collapse of the European Union and the global financial markets which would potentially send the world into a severe and extended depression at the risk of upsetting a tired, old, increasingly irrelevant banker?

Austrian central bank chief and ECB board member Ewald Nowotny last night suggested that perhaps a short-term partial default could be accommodated under the rules so to avoid outright default, which would otherwise be inevitable given Greece can no longer make its interest payments. At last, a light at the end of the tunnel.

With that news the euro traded higher, and Europe was further appeased by strong demand for a Spanish sovereign bond auction held last night, albeit the interest rate was a lot more expensive than at the previous equivalent auction.

IBM (Dow) had already posted its solid result after the bell on Monday night, and in last night's trade it closed up 5.7%. Before the bell Coca-Cola (Dow) posted its result and provided a very strong "beat", sending shares in the usually dour staple up 3%. IBM and Coke together represented a good deal of last night's move in the 30-stock average.

Bank of America (Dow) didn't help. Both it and Goldman Sachs missed on their results, sending both down around 1%, but America's largest holder of non-agency mortgages ? Wells Fargo ? posted a very strong result which sent its shares rocketing 5.7%.

Amidst the excitement of earnings results, there was also good news on the housing front. Bad weather had delayed many housing projects before May but with the skies having cleared, May saw a 14.6% jump in housing starts to 629k units when economists had forecast 570k units.

By lunch time the Dow was up 100 points, and then around 1.30pm President Obama made an impromptu press statement. It appeared the "gang of six" which has been leading the debt ceiling/budget cut negotiations had reached a level of resolution the president found workable. Concessions were made on both sides. For once it really did look like America could avoid a default of its own.

It was always going to happen of course, particularly given mounting pressure from major US banks and corporates, but even if the handshakes are made on this deal there remains one not insignificant stumbling block. The subsequent bill still has to be passed by the House.

We are reminded of 2008, after the fall of Lehman, when a hastily prepared and brief bill proposing the TARP was put to the House. Knowing that they had the Administration by the you know whats, every self-serving, parochial, popularity-seeking representative saw the chance to blackmail the government into providing home state rewards as a trade-off. After another week the brief TARP document had grown to hundreds of pages of conditions as global stock markets free fell in the meantime. Will we go through the same process again?

If the risk trade was the winner across the markets last night, gold was the victim. Good news was always going to be a trigger for profit-taking and psychological levels like 1600 are good places to do so. Gold fell US$16.30 to US$1588.80/oz. Silver dropped 4%.

Base metals have been waiting quietly for something to happen either way, and last night the dam broke to the upside. All metals were up 1.5-2.5%. Oil joined in, with Brent rising US$1.01 to US$117.06/bbl and West Texas US$1.57 to US$97.50/bbl.