The US Fed Beige book suggested that the US economy expanded at a modest pace across the 12 surveyed districts. However activity levels were mixed and showed signs of weakening. The labour market remained ´´stable´´ and wage pressure was minimal. Manufacturing conditions were mixed with the pace slowing in many areas. Real-estate remained weak but consumer spending increased slightly due to vehicle sales.

US ICSC Chain Store Sales rose 2.7pct last week compared with a year ago. ICSC research said it expects comparable store sales excluding fuel to rise 3-4pct in September.

European shares rallied on Wednesday albeit on low volumes. Investors searched for oversold stocks including manufacturing and German blue chips. A German court ruling supporting the country´s involvement in the euro zone rescue fund also added to the optimism. The FTSEurofirst index rose 3pct while the German Dax gained 4pct and the FTSE index closed up 3.1pct.

US sharemarkets bounced on Wednesday reversing three days of losses. The German court ruling supporting the euro zone bailouts was the main driver. Financial stocks which had been sold-off heavily in the prior session recovered ground with the KBW Bank index gaining nearly 6pct. However volumes were light as investors waited on President Obama Jobs package. The Dow Jones gained 276pts or 2.5pct with the S&P 500 up 2.9pct and the Nasdaq rose 75pts or 3pct.

US long-dated treasuries fell on Wednesday (yields higher) as investors locked in profits from the recent rally. The rally in equities also supported the shift away from bonds. US 2yr yields were flat at 0.204pct but US 10yr yields rose by 7pts to 2.04pct.

The US dollar weakened against the Euro and commodity currencies following the German court ruling backing the country´s role in euro zone bail-outs. The Euro hit early highs near US$1.4145 before falling to US$1.4010, ending trade near US$1.4100. The Aussie dollar rose from lows around US105.80c to US106.50c, ending US trade near its highs. And the Japanese yen traded in a tight range between 77.10 yen per US dollar to JPY77.45 before ending US trade near JPY77.25.

US crude oil price rallied on Wednesday to a five-week high. Production outages in the Gulf of Mexico and a low pressure system over Mexico´s Bay of Campeche were the key drivers. The low pressure system had the potential to move towards the Gulf and has a 70pct chance of becoming a tropical cyclone. Nymex crude oil rose by US$3.32 or 3.9pct to US$89.34 a barrel and London Brent crude rose by US$2.91 to US$115.80 a barrel.

Base metal prices rallied on the London Metal Exchange on Wednesday in response to the improved risk appetite and weaker US dollar. Nickel was the standout up 5.4pct. And the gold price fell as investors sold the safe haven asset. The Comex December gold price was down by US$53.20 an ounce or 2.8pct to US$1,820.10.

Ahead: In Australia, labour figure are released. In the US, Trade data and consumer credit are released.