In a speech to business economists Fed Chairman Bernanke confirmed that the Fed still believes that accommodative policy is needed to make further progress in lowering the unemployment rate despite being encouraged that the rate has fallen to 8.3pct - “conditions remain far from normal, as shown, for example, by the high level of long term unemployment.”

The Dallas Fed manufacturing index fell for the first time in three months, down from 17.8 to 10.8. New orders dropped back into negative territory, while production remained stable. US pending home sales fell 0.5pct in February.

European shares rallied on Monday following the remarks by Fed Chairman Bernanke. In addition the upbeat German Ifo reading added to the risk trade. The headline business climate index edged up from 109.7 to 109.8. However the Spanish market bucked the trend after the governing People´s Party failed to achieve an outright majority in regional elections. The benchmark FTSEurofirst 300 index rose by 0.9pct with the German Dax up 1.2pct and UK FTSE up 0.8pct.

US sharemarkets recorded healthy gains on Monday as Bernanke´s comments reinforced that a further round of quantitative easing may be possible. All 10 S&P 500 sectors were higher, led by technology and health care. Supporting markets even further was news that for the first time Germany had signalled its willingness to increase the resources available to tackle the Euro zone debt crisis. At the close, the Dow Jones was up by 161pts or 1.2pct with the S&P 500 up by 1.4pct and the Nasdaq gained 55pts or 1.8pct.

US short-term treasuries rallied on Monday (yields lower) as worries about Europe eased and Bernanke raised hopes of a third round of stimulus. US 2yr yields fell by 2pts to 0.35pct and US 10yr yields held steady at 2.25pct.

The US dollar fell against major currencies on Monday after Bernanke´s comments spurred expectations of more policy easing. The Euro rose from lows around US$1.3200 to US$1.3365, and was near US$1.3360 in late US trade. The Aussie dollar rose from lows around US104.25c to US105.45c and was near US105.40c in late US trade. And the Japanese yen lifted from 82.55 yen per US dollar to JPY82.95 and was near JPY82.80 in late US trade.

Benchmark crude oil prices rose on Monday as investors shifted back into riskier asset classes. The US Nymex rose by US16c or 0.1pct to US$107.03 a barrel while London Brent crude rose by US52c to US$125.65 a barrel.

Base metal prices rose on Monday as Bernanke´s commented reaffirmed the US Fed´s ultra-accommodative monetary stance. Metals rose between 0.3-2.0pct. And the gold price gained ground on the back of the weaker US dollar. The April Comex gold price was up by US$23.20 or 1.4pct to US$1,685.60 an ounce - a two week high.

Ahead: In Australia, no major economic data is scheduled. In the US, data on home prices and the Richmond Fed index are released.